Illinois' new 38 cent gas tax will probably send drivers to Indiana, experts say

Gasoline tax hikes in Illinois will likely send more drivers looking for better prices in Indiana, but it's unclear if a higher levy on cigarettes will have the same effect, industry analysts said.

Starting July 1, the Illinois gas tax will double from 19 cents to 38 cents per gallon, compared to the 29 cents per gallon tax in Indiana. 

"The gas station convenience store industry in Illinois is on the endangered species list," William Fleischli, the executive vice president of the Illinois Petroleum Marketers Association/Illinois Association of Convenience Stores, told The (Northwest Indiana) Times. petroleum analyst Patrick DeHaan agreed. 

"Drivers that shop around will find easy savings by going into Indiana, and that will likely lead to a loss in gallon sales for Illinois," DeHaan said.

Also next month, cigarettes will cost $1 more per pack in Illinois on top of the $1.98 tax per pack already in place. Elena Ivanova, of Chicago's health department, told the Associated Press that the tax on cigarettes in the city -- already the highest in the nation -- will increase to $8.16 per pack. 

By comparison, Indiana taxes every pack of cigarettes 95 cents.

Gus Olympidis, the CEO of Family Express convenience stores, said that although Indiana's cigarette taxes are much lower, that cost advantage could be lost during the next legislative session when Indiana lawmakers could again consider raising cigarette taxes.
   A proposal to raise the tax by $2 per pack failed in the Indiana Legislature this year, despite support in the polls and the backing of the Indiana Chamber of Commerce.
   Nonetheless, Fleischli predicts that the cigarette and gas tax hikes, combined, will be devastating to businesses in Illinois.
   "Borders will become wider and our customers will cross them to buy motor fuel, cigarettes, and other ancillary items, costing the state tax dollars and companies profits," he said. "Our motor fuel volumes will go down 2% to 3% a year for about three years then start to recover. Inside sales will go down 10% to 12% and may never recover."