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Budget deal eliminates grocery tax, reduces retailer sales tax discount

Saturday, May 25, 2024 - Posted by Rich Miller

* Subscribers were told about this, and much more, yesterday morning. Tribune

One issue on which there appears to be broad agreement is repealing the 1% statewide sales tax on groceries. Ditching the tax won’t affect the state’s bottom line because the money all goes to local governments. […]

To make up for the lost revenue, municipalities — both those with broader home rule powers to raise taxes on their own and non-home-rule communities — would be granted the ability to levy their own 1% tax on groceries. Towns without home rule would be given the ability to tack on an additional 1 percentage point tax on general retail sales.

Along with other concessions, the proposal on the table was enough to win the support of the Illinois Municipal League, which represents local governments across the state.

“We are pleased with the overall framework of the issues affecting municipalities,” Brad Cole, CEO of the Illinois Municipal League, said in a statement. “Local leaders have long advocated for greater authority to provide for the programs and services their residents rely on every day, which they will be granted under this budget agreement.”

The locals will also receive tons of money from a variety of other sources.

I really didn’t think Pritzker would actually achieve this. The tax will go away in January of 2026.

* Subscribers were also told about this win. Sun-Times

Another politically thorny Pritzker provision is also expected to be in the revenue measure — capping the discount that retailers receive for collecting sales tax at $1,000 per month. The governor’s office contends it would mostly impact larger retailers and generate another $101 million for state coffers.

Budgeteers tried to appease opponents from the retail industry by prohibiting processing fees on the sales tax portion of electronic transactions. Currently, financial companies can charge fees on the entire transaction, which includes the goods purchased as well as the tax.

A plan pushed by state Sen. Cristina Castro, D-Elgin, is also expected to be included in the revenue measure. Castro requested a tax on third-party entities that resell large blocks of hotel rooms but avoid paying the standard hotel operator’s room occupation tax. Her initiative is expected to bring in about $50 million.

The retailers also received some concessions in exchange for the agreement. The elimination of processing fees on taxes has received big pushback (you may have caught an ad on here yesterday), but it’s part of the deal. Again, I’d have bet against the governor on that.

Also, Sen. Castro’s re-renters tax will generate millions for local governments. And, as you saw yesterday, negotiators agreed to a graduated tax on sports betting companies.

       

2 Comments
  1. - Madison - Saturday, May 25, 24 @ 8:19 am:

    The retailers are getting a government sanctioned junk fee built into every transaction. The new tax on processing fees will go directly to the retailer, not the government. Consumers will think they are paying a tax but instead be paying a junk fee. Pretty sweet concession for retailers.


  2. - low level - Saturday, May 25, 24 @ 11:55 am:

    Five years in and JB Pritzker is establishing himself as one of the very best governors Illinois has had. He just keeps chalking up wins. Very impressive job by him and his team.


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