Illinois has the second highest state gasoline tax in the US, and it currently stands at 39.2 cents per gallon. The tax was scheduled to increase in July, but the state government postponed the 2022 increase until next year (when the 2022 and 2023 tax increases will add 6 cents per gallon to the tax

Learning Goal: I’m working on a management discussion question and need an explanation and answer to help me learn.

Illinois has the second highest state gasoline tax in the US, and it currently stands at 39.2 cents per gallon. The tax was scheduled to increase in July, but the state government postponed the 2022 increase until next year (when the 2022 and 2023 tax increases will add 6 cents per gallon to the tax). The stated purpose of the tax reduction was to help Illinois residents cope with the elevated inflation rate. Critics of the tax reduction point out that 2022 is an election year, and they claim that this is a policy designed to help the governor and other elected officials retain their jobs. For now, let’s ignore the political situation and focus on the economic impacts of the tax policy.

Critics have also noted that gas prices are currently high due to supply disruptions, and the gas tax reduction actually encourages people to buy more gas at a time when we should try to conserve the resource. Also, the Illinois residents who benefit most from the tax reduction are those who consume more gasoline, and these people tend to have higher incomes and drive larger vehicles. The state has also issued a small tax rebate ($50 per person) to all taxpayers except high-income residents, and they have suspended the 1% tax on groceries. These policies may have a relatively larger impact on the budgets of low-income residents of Illinois.

Should the state have kept the gasoline tax at the higher level and used other tools to help people cope with inflation? If so, what tools should be used by the Illinois government? If not, how do you respond to the critics of the gasoline tax reduction? Please explain your responses.

Your post must be substantive and demonstrate insight gained from the course material. Postings must be in the student’s own words – do not provide quotes!