Illinois taxpayers to face $2.1B in new taxes on July 1

Starting this July, Illinoisans will pay higher taxes on gasoline, cigarettes, video gaming and more.

Lawmakers ended their spring session by imposing a whopping $4.7 billion in taxes and fee hikes on Illinoisans.

The first round of those increases will take effect July 1. Among them will be a doubling of the state’s gas tax to 38 cents from 19 cents per gallon. And while that’s the steepest tax increase to hit residents this summer, Illinoisans will also pay higher taxes on cigarettes, vaping products, gaming and more.

Taken together, these tax and fee hikes will cost taxpayers a total of $2.1 billion. Here are each of the new and increased taxes taking effect July 1:

Double state’s motor fuel tax ($1.3 billion)

The most painful of the new tax hikes taking effect July 1 will be a doubled state gas tax. Spiking to 38 cents from 19 cents per gallon, Illinoisans will soon be shouldering the second-highest overall gas tax burden in the U.S.

This tax hike will cost the average Illinois driver $100 more each year with the aim of generating $1.3 billion in revenue, according to state projections.

$1 per pack increase in cigarette taxes ($156 million)

Illinois already charges the fourth-highest cigarette tax in the Midwest, at $1.98 per pack. But a $1 cigarette tax hike taking effect July 1 will bring the state’s tax to $2.98 per pack – ninth-highest in the nation, and highest among neighbor states.

This $156 million tax increase will especially hit Chicagoans, who already pay the highest overall cigarette tax burden in the country, with combined federal, state and local taxes totaling $7.17 per pack. The state’s cigarette tax hike will bring the Windy City’s total tax on tobacco to $8.17 per pack.

E-cigarette tax increase ($10 million)

This summer, Illinois will stand out as the only state among its neighbors with a statewide tax on e-cigarettes. Beyond its own borders, Illinois will be one of only eight states in the country to impose a tax on e-cigarettes at the state level.

New tax on managed care health insurance organizations ($390 million)

Managed health care organizations, a type of health insurance company intended to control costs, will be hit with a new tax based on the number of members they have and whether they are private or part of the state’s Medicaid program.

As explained by the Civic Federation, the plan will free up $390 million in general revenues through a combination of increased federal reimbursements and shoring up Medicaid accounts that are not part of the general operating budget. However, most of these taxes would be paid back through federal reimbursements on state Medicaid spending.

Increased tax on video gaming machines ($150 million)

The tax rate for proceeds from video gambling machines will increase to 33% from 30%, with an additional 1% increase in the rate the following year.

Tripled real estate transfer tax for nonresidential property ($68 million)

The real estate transfer tax for commercial property in Illinois will triple from 50 cents up to $1.50 per $500 of value sold. For the sale of a $300,000 parcel of property, this represents an extra $600 in transfer taxes.

Summer pain

Unfortunately, these aren’t the only tax hikes Illinoisans have to look forward to: Another $2.59 billion in tax hikes passed during lawmakers’ spring session are set to take a bite out of taxpayers’ budgets in the long run.

And despite the new surge in revenue, Gov. J.B. Pritzker’s budget for the coming fiscal year remains out of balance by up to $1.3 billion.

Instead of meeting taxpayers halfway with structural spending reforms, state lawmakers instead ended spring session asking voters for more taxing authority by sending Pritzker’s “fair tax” referendum to voters’ 2020 ballots.

Pritzker has said changing Illinois’ income tax system from flat to progressive will finance more spending while providing relief to middle-class families. But voters increasingly view Pritzker’s “fair tax” plan as a blank check for state lawmakers. Illinoisans are right to be suspicious: The doubled gas tax hike and other fees taking effect already erase the “relief” many middle class families would see under such a plan.

High taxes for years have chased Illinoisans out of state. Instead of finding new ways to tax residents on the way out, state lawmakers should pursue meaningful reforms that rein in spending and foster a more inviting tax climate.