(Editor's note: This article was published first at Illinois Policy Institute).
Illinois’ state and local governments charge some of the highest retail sales taxes in the nation, with a combined state and average local retail sales tax rate at 8.81% in January 2022. It was the Midwest’s highest and eighth-highest in the U.S.
Those are the results of a recent analysis by the non-partisan Tax Foundation. It showed while Illinois’ sales tax rates are among the highest in the nation, neighboring Wisconsin has some of the lowest at 5.43%. The significant difference likely means Illinois businesses, along with state and local governments, lose out on revenue from consumers crossing state lines to save.
Evidence suggests this has been happening for years in Chicago. Its 10.25% retail sales tax rate is second-highest in the nation among major cities.
Many Illinoisans are unable to escape the state’s cumbersome sales taxes. Illinois is one of only 13 states to apply sales taxes to groceries. While the tax on groceries is 1%, not the full state sales tax rate of 6.25%, surcharges on groceries when consumers in the vast majority of states avoid them are tough to swallow.
Now, during an election year, Gov. J.B. Pritzker is proposing a temporary suspension of the grocery sales tax. While Illinoisans are in desperate need of tax relief, the temporary proposal is a gimmick when Illinois needs spending reforms that would permanently improve the state’s fiscal condition and allow for true relief. Pritzker’s temporary tax break is part of his new budget proposal that relies on federal aid while still running a deficit of $1.5 billion.
Without lasting, structural reform, temporary pauses won’t give Illinoisans relief from the nation’s leading state and local tax burden. They just give Pritzker a campaign ad.