Mercedes Mullins
Illinois' gas tax increase, which came into effect on July 1, 2024, will impact the price of diesel fuel in the state. The motor fuel tax on diesel fuel has increased from 19 cents to 38 cents per gallon, with an additional tax of 7.5 cents per gallon (up from 2.5 cents) for diesel, bringing the total tax on diesel fuel to 45.5 cents per gallon. This additional fee is charged for the privilege of operating motor vehicles that use diesel fuel. The gas tax increase is expected to generate about $159 million in revenue for the next fiscal year, which will be allocated to the state's $45 billion capital infrastructure plan. Chicago, Lake, and Will counties have also been granted the authority to increase local gas taxes further, on top of the state rate.
| Characteristics | Values |
|---|---|
| Date of tax increase implementation | 1st July 2024 |
| Previous motor fuel tax | 19 cents per gallon |
| New motor fuel tax | 38 cents per gallon |
| Additional tax on diesel fuel | 7.5 cents, up from 2.5 cents |
| Total tax on diesel fuel per gallon | 45.5 cents |
| Annual increase in motor fuel tax | 2% |
| Cap on annual increase | 1 cent |
| Gas tax rate in Illinois compared to other states | Second highest in the US |
| Gas tax rate in Illinois including state and local excise taxes | 56.32 cents per gallon |
| Gas tax rate in Illinois from July 1, 2025 | 48.3 cents per gallon |
| Diesel tax rate in Illinois from July 1, 2025 | 55.8 cents per gallon |
| Average annual expenditure increase for Illinois drivers | $143 |
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What You'll Learn
The Illinois diesel tax increase
On July 1, 2024, Illinois implemented a diesel tax increase as part of its plan to address the state's $3.2 billion structural budget deficit. The tax increase on diesel fuel is expected to impact the cost of operating motor vehicles that use this fuel type.
Prior to the increase, the tax on diesel fuel in Illinois was 19 cents per gallon. With the new tax legislation, the rate has increased to 38 cents per gallon, including an additional fee of 7.5 cents per gallon, specifically for diesel fuel. This brings the total tax on diesel fuel to 45.5 cents per gallon. The legislation also includes a provision for an annual increase in the motor fuel tax, linked to the consumer price index, with a cap of a 1-cent per-year increase.
The diesel tax increase is a component of Illinois' broader motor fuel tax hike, which also affects regular gasoline. The additional revenue generated by these tax increases will be directed towards the state's $45 billion capital infrastructure plan. This plan aims to address transportation projects, including road and bridge repairs, and enhance public transit systems. The expected revenue generation from the tax increase is approximately $159 million for the upcoming fiscal year.
The impact of the diesel tax increase will be felt across Illinois, with residents facing higher costs for fuelling their vehicles. According to Patch.com, the tax increase will result in Illinois drivers paying 55.8 cents per gallon for diesel fuel as part of the "two-part" fuel tax. This includes the Part B tax rate, which is determined annually by the Illinois Department of Revenue, using the average selling price per gallon and multiplying it by 6.25%. The motor fuel tax increase is projected to generate an additional $1.3 billion in infrastructure funding.
The diesel tax increase in Illinois is part of a broader trend of states reevaluating their fuel tax structures. With the growing popularity of electric vehicles and improvements in fuel efficiency, traditional gas taxes are becoming less effective as user fees for road use. Some states are considering alternative approaches, such as vehicle mileage taxes or vehicle miles traveled (VMT) taxes, to ensure sustainable funding for road infrastructure and transportation services.
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How the tax will affect consumers
The increase in the gas tax in Illinois will have a significant impact on consumers, particularly those who use diesel fuel. The tax on diesel fuel will increase to 45.5 cents per gallon, a rise of 17 cents per gallon. This includes an additional fee of 7.5 cents per gallon, up from 2.5 cents, for the "privilege of operating motor vehicles that use diesel fuel".
The increase in the gas tax will result in higher prices at the pump for all consumers. Illinois drivers will, on average, spend an extra $143 per year due to the gas tax increase. This will affect all groups in Illinois, not just a small segment of society. The tax increase will also impact those who smoke, with the tax on a pack of cigarettes rising to $2.98, up from $1.98.
The gas tax increase is part of a broader infrastructure plan aimed at generating revenue for transportation projects such as road and bridge repairs and public transit. The tax increase is expected to bring in about $1.3 billion in added infrastructure funding. Additionally, Chicago and some counties in Illinois have been granted the authority to raise their local gas taxes by 3 to 8 cents per gallon, further increasing the cost of fuel for consumers in those areas.
The impact of the gas tax increase on consumers could be mitigated by the increasing popularity of electric vehicles and improvements in vehicle fuel efficiency. However, the state is considering implementing a vehicle mileage tax to compensate for the potential loss in revenue due to these factors. Overall, the gas tax increase in Illinois will result in higher costs for consumers, particularly those who use diesel fuel, but it is intended to fund much-needed improvements in the state's infrastructure.
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The total tax on diesel fuel
The state of Illinois recently increased its motor fuel tax, which applies to both gasoline and diesel fuel. Effective July 1, 2024, the tax on diesel fuel rose from 19 cents to 38 cents per gallon. In addition to this, there is a further tax for those operating motor vehicles that use diesel fuel. This additional fee has increased from 2.5 cents to 7.5 cents per gallon, bringing the total tax on diesel fuel in Illinois to 45.5 cents per gallon.
The increase in the motor fuel tax is part of a wider plan to address Illinois' $3.2 billion structural budget deficit and fund a $45 billion capital infrastructure program. The state expects to generate approximately $1.3 billion in added infrastructure funding from the tax increase. This funding will be used for transportation projects, including road and bridge repairs and improvements to public transit.
The new law also allows certain counties to increase their local gas taxes on top of the state rate. For example, Chicago has been authorized to raise its municipal gas tax by 3 cents per gallon, while Lake and Will counties can increase their local gas taxes by 4 to 8 cents per gallon. When including state and local excise taxes, Illinois's per-gallon rate moves to 56.32 cents per gallon, making it the second-highest in the nation.
The motor fuel tax increase has drawn bipartisan support, with proponents arguing that it provides a necessary long-term sustainable funding source for critical infrastructure projects. However, it is important to note that the gas tax increase is not the only measure implemented to address the state's budget deficit. Other fee increases for licenses and registrations are also expected to contribute to the funding of the infrastructure plan.
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The purpose of the tax increase
The primary purpose of the tax increase in Illinois is to generate revenue for the state's $45 billion capital infrastructure plan. The tax increase on motor fuel, including diesel fuel, is expected to bring in approximately $1.3 billion in additional funding for infrastructure improvements. This includes spending on transportation projects such as road and bridge repairs and public transit, which will benefit the public and address issues of repair, safety, and congestion.
The tax increase is intended to function as a user fee, where drivers are charged for the use and maintenance of the roads they drive on. By implementing this user fee structure, the state aims to attribute the costs of transportation services directly to the people who use them. This approach avoids charging taxes to individuals who do not utilise these specific government services or infrastructure.
Moreover, the tax increase serves as a pollution deterrent, as fuel taxes can influence consumer behaviour and encourage the adoption of more fuel-efficient or electric vehicles. This dual purpose of generating revenue and discouraging pollution contributes to the state's overall objectives.
Additionally, the tax increase addresses the state's structural budget deficit, which currently stands at $3.2 billion. By increasing taxes on motor fuel, cigarettes, and e-cigarettes, Illinois aims to eliminate this deficit and improve its fiscal position. This two-pronged approach of increasing taxes and allocating funds towards infrastructure demonstrates the state's focus on both revenue generation and expenditure.
While the tax increase will impact all Illinois residents who purchase motor fuel, it is important to note that the additional revenue will be utilised for the benefit of the public and the state's long-term financial stability. The infrastructure improvements and transportation projects funded by these taxes are designed to enhance the quality of life and mobility for Illinois residents.
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How Illinois' tax compares to other states
Illinois's gas tax rate is one of the highest in the nation. As of 2023, the state's gas tax rate was 66.5 cents per gallon, second only to California's rate of 77.9 cents per gallon. Illinois's high gas tax rate is due in part to the state's capital infrastructure plan, which aims to address repair, safety, and congestion issues caused by poor infrastructure. The plan is expected to bring in about $1.3 billion in added infrastructure funding.
Illinois's gas tax rate has not always been so high. In July 2018, the state's per-gallon rate was 56.32 cents, which placed it second behind Pennsylvania's rate of 58.7 cents. At that time, the federal gas tax was 18.4 cents per gallon, and the federal tax on special fuels like diesel was 24.4 cents per gallon. However, diesel taxes in some states were much higher.
As of 2025, California still has the highest gas tax rate in the nation at 59.6 cents per gallon. Pennsylvania is close behind at 57.6 cents per gallon, followed by Illinois at 59 cents per gallon. Oregon has a gas tax rate of 40 cents per gallon, while Washington's rate is 49.4 cents per gallon. These rates do not include state or local sales taxes, which can further increase the cost of gasoline for consumers.
While high gas taxes can be a burden for drivers, they are an important source of revenue for states. Gas taxes are commonly used to fund highway repair and maintenance, as well as other government infrastructure projects. They are also an example of a "user fee," where the government imposes a charge for the use of a service or good. In the case of gas taxes, drivers benefit from the services that their tax dollars pay for, such as road construction, maintenance, and repair. Additionally, gas taxes can encourage efficient road use and help limit congestion and the wear and tear that comes from overuse.
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Frequently asked questions
The new tax rate for diesel fuel in Illinois is 45.5 cents per gallon, up from 19 cents.
The new tax rate came into effect on July 1, 2024.
The tax increase is expected to generate about $159 million in revenue for the next fiscal year, which will be used to fund the state's $45 billion capital infrastructure plan.
