Vehicle-Miles-Traveled Tax May Be on Its Way to Illinois

The Bloomberg BNA Tax Management Weekly State Tax Report filters through current state developments and analyzes those critical to multistate tax planning.

By Michael J. Bologna

April 13 — Illinois lawmakers are considering legislation that would replace the state's gasoline tax with a distance-based road user fee under legislation reviewed by an influential Senate committee.

The Senate Executive Committee took testimony April 13 on S.B. 3267, creating the Illinois Road Improvement and Driver Enhancement Act. If enacted, the bill would roll back Illinois' motor fuel tax and replace it with a taxation scheme linked to vehicle miles traveled (VMT) within the boundaries of the state.

S.B. 3267 was introduced by Senate President John Cullerton (D), who has studied the issue in other jurisdictions. Cullerton has said the proposed law addresses a structural problem with the motor fuel tax, which has failed to generate adequate revenue to fund road construction and maintenance in recent years.

“We see the gas tax revenues decline even as wear and tear on the roads goes up. There is growing recognition that a gas tax system is self-defeating, certainly not sustainable,” John Patterson, a spokesman for Cullerton, told Bloomberg BNA prior to the committee hearing.

Patterson said the problem will only get worse as electric cars, hybrid vehicles and efficient gas-powered vehicles grow in popularity.

“If everyone in Illinois went out and bought a Tesla, the money going into the road fund would evaporate overnight, leaving nothing for road construction,” he said.

Oregon and California

Oregon became the first state to test the VMT tax under a pilot program called OReGO. The pilot program was launched last year and recruited 5000 motorists to test drive the new VMT scheme for collecting road construction revenue (2015 Weekly State Tax Report 18, 6/19/15).

The California State Transportation Agency is scheduled to launch its own pilot project this summer. The pilot was required under S.B. 1077, enacted in 2014 (2014 Weekly State Tax Report 19, 10/17/14).

Patterson said S.B. 3267 would maintain Illinois' motor fuel tax primarily for out-of-state drivers using Illinois roads. Illinois residents would continue to pay the tax at the pump, but any taxes paid could be claimed as a credit against the new VMT tax.

S.B. 3267 would tax Illinois drivers at a rate of approximately 1.5 cents per mile driven. Motorists would have three options for estimating their VMT obligations to the state:

  •  Drivers could install a transponder system on their vehicles that would record vehicle miles driven in Illinois;
  •  Drivers could pay the VMT tax, calculated against an odometer reading; and
  •  Drivers could pay a flat annual fee of approximately $450, reflecting 30,000 miles of driving.

 

Patterson conceded the VMT concept would be difficult for motorists to absorb initially. At the same time, he said the proposed revenue system is the state's most equitable and reliable option for funding road construction and maintenance.

To contact the reporter on this story: Michael J. Bologna in Chicago at mbologna@bna.com

To contact the editor responsible for this story: Ryan Tuck at rtuck@bna.com

For More Information

S.B. 3267 is at http://src.bna.com/d7Q.

Information on the OReGO program is at http://www.myorego.org/.

Information on California's pilot program is at http://src.bna.com/d7R.

For additional discussion of the gas tax in Illinois, see Excise Taxes Navigator, at Illinois 8.1.