Groups Scrutinize Pritzker Tax Plan
Governor JB Pritzker gives his State of the State and Budget address Wednesday in Springfield. Multiple tax provisions in his proposal are facing scrutiny from advocacy groups.
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Governor JB Pritzker’s budget proposal Wednesday included tax increases on gaming and business as well as an end to the grocery tax, which actually benefits towns and municipalities and not state coffers.
As business and advocacy groups dig more deeply into Pritzker’s spending plan, they’re raising plenty of concerns.
The Illinois Municipal League, which represents cities and towns across the state, is voicing concern over the proposal as it would take revenue out of the coffers of cities around the state, potentially leading to higher property taxes.
When Pritzker and the General Assembly Democrats suspended the grocery tax in the run-up to the 2022 election, municipalities were reimbursed, at least partially.
Now, they’d have to eat the hole. And it’s not like they can just reinstate the tax city by city.
Brad Cole, IML Chief Executive Officer, said there’s no mechanism to keep the tax in place.
“Local governments do not have the authority to implement the tax nor do they have the ability to collect sales tax,” Cole said in a statement. “It is collected on the state ST-1 form. The state collects sales taxes, that’s what the Department of Revenue is for.”
The 1% tax doesn’t apply to all purchases at the grocery store, and some argue the benefits for taxpayers is minimal. But, the Pritzker administration projects taxpayers could save $400 million each year if the tax is eliminated.
IML has long advocated for an increase to local funding in the Local Government Distributive Fund (LGDF), which is a percentage of income tax revenues the state has long shared with local governments.
Pritzker is proposing keeping it flat.
“Flat LGDF is better than reduced LGDF,” Cole said in a statement. “IML still intends to seek an increase, but starting from even is a better position than in the past.”
The state is also proposing saving $500 million a year by increasing the threshold for the tax deduction on business losses from $100,000 to $500,000, meaning a business would have to lose $500,000 before claiming any deduction.
In a statement, the Illinois Chamber of Commerce opposed the move.
“The cap is nothing more than forced borrowing of funds from Illinois Businesses to finance the government,” a Chamber spokesperson said in a statement.
Another likely point of contention in negotiations will be the proposal to eliminate the 1.75% discount retailers get on sales tax collections. The discount is, essentially, reimbursement for collecting taxes for the state.
“Retailers subsidize the cost of their mandated responsibility,” said Illinois Retail Merchants Association President and CEO Rob Karr. “
And he disagrees with those who say the state shouldn’t be giving tax revenue to large retailers like Amazon or Wal-Mart.
“[The state isn’t] giving, they’re reimbursing them partially for their cost of doing what the state would otherwise be doing, which is collecting and remitting the sales tax,” Karr said. “Why should it matter what size somebody is? And where does that arbitrary line get drawn?
Karr said there are other complicating factors, like a surcharge for credit and debit card swipes. He said, after surcharges, a retailer likely saves less than 90 cents on a $1,000 purchase made in Cook County.
