Pritzker Signs Grocery Tax Repeal, Blows Hole in Municipal Budgets
Governor JB Pritzker does a photo op at a grocery store during the 2022 campaign.
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Governor JB Pritzker signed legislation Monday ending the state’s tax on groceries, but it is expected to pull tens of millions of dollars out of municipal budgets, leaving local officials with the decision of how to close the hole.
The state currently collects the 1% sales tax on groceries, but redistributes the money to the municipality it was collected in.
While the repeal is only expected to provide relief to taxpayers a few cents at a time, it is expected to cost municipalities tens of millions of dollars each year.
Some downstate mayors we spoke to Monday have either already raised taxes, or will be forced to, to close the budget gap.
The Illinois Municipal League has estimated repeal of the tax will cost the City of Chicago between $60-80 million each year. Aurora is estimated to lose around $4.5 million in revenue, Champaign around $3 million, and Decatur around $2 million.
Champaign Mayor Deborah Frank Feinen says her city council has already raised its home rule sales tax on all products to cover the loss from the grocery tax when the repeal takes effect in 2026.
(Disclosure: I worked on Feinen’s first two campaigns for Mayor in 2015 and 2019.)
Feinen, who becomes President of the Illinois Municipal League later this year, says they’re just moving to a new tax as the state eliminates the current grocery tax.
“People’s goods (through sales tax) will be taxed at a higher rate, but groceries will not have that tax on them,” said Feinen. “People are going to pay about the same.”
Feinen says the city had used refunds of grocery taxes to lure large businesses, like Costco, into the city. She says the city will now have to renegotiate the incentive deal they made.
Rock Island Mayor Mike Thoms says his community will lose around $1 million each year in revenue. He says if they don’t raise taxes elsewhere, it would mean cuts to essential city services, infrastructure, or layoffs in the city police and fire departments.
“I think the governor was doing it to look good at the state, that it’s not always about tax increases, it’s not always about income,” he said. “But he gave up something that wasn’t going to the state anyway. It’s frustrating that the state is controlling the finances of local governments.”
Thoms says he fears residents will cross the border to Iowa to find cheaper goods or groceries, depending on which tax they raise.
The Illinoize spoke to multiple mayors from around the state Monday. Most declined to comment on the record as to not criticize Pritzker or because their city council had not made a final decision on how to replace the lost revenue.
But each agreed they’ll have to raise taxes somewhere to pay for the “tax cut” from the state.