Suburbs shouldn’t impose their own grocery taxes

Inflation and the high cost of goods were the talk of the Democratic National Convention in Chicago last month.

Recent grocery spikes have residents feeling the pinch. The price of groceries has ballooned by nearly $3,000 nationwide in just the past four years, a massive increase considering groceries only increased by about half that amount in the prior 10 years.

Gov. JB Pritzker attempted some political theater this spring when he and the General Assembly eliminated the statewide grocery tax. It was a hollow victory for taxpayers.

Why? Because although Illinois is just one of 13 states to levy a grocery tax, state government receives none of the tax revenue. All the money goes to local towns and cities. Plus, state leaders gave those local governments the ability to bring the tax right back without getting voter approval.

Now, the suburbs are left scrambling with holes in their budgets, figuring out how to pay for this “gift” from state leaders that taxpayers likely will be on the hook for when the change takes effect in 2026.

But cities already are acting. Highland, a town near St. Louis, and Martinsville, a small city close to Indiana, already have discussed enacting respective city grocery taxes during city council meetings. Chicago suburban municipalities have publicly said they want to keep the option open until they have a better sense of their budgets, declining to commit to no new grocery taxes on residents.

Smaller villages rely on the grocery tax to fill their budgets. For example, Highland is expected to lose $330,000 to $350,000 a year from the grocery tax elimination. It was easy for Pritzker to tout this win since the state won’t lose any revenue, but smaller towns throughout Illinois could now act to make up for the sizable budget gaps.

The bigger problem? It would be disadvantageous for some towns to implement a grocery tax while others don’t. A local grocery tax will encourage shoppers to look outside their communities for groceries, which would end up hurting mom-and-pop stores, boutiques and delis — worsening local economies. More and more suburbs could be incentivized to implement the tax — essentially making the elimination moot.

Financial leaders in some villages, such as River Forest, which finished the fiscal year with a $2.3 million surplus, also have been considering implementing a grocery tax. Representatives from neighboring Oak Park said the village “has no plans to raise taxes to make up for the grocery tax loss.” River Forest residents simply could avoid the tax hike by shopping next door.

The General Assembly also allowed for home-rule towns and villages, or those with more than 25,000 residents, to raise their general sales tax rate by an additional 1 percentage point — again, without voters’ OK.

So, a city could implement a 1% grocery tax and increase its municipal home-rule sales tax by 1%, too. That 2 percentage-point tax hike would add about $300 a year to a family’s moderately priced grocery list.

This populist political maneuver seems all the more disingenuous when you recall that Pritzker’s budget also included more than $800 million in new taxes, most of which fall on businesses trying to make ends meet in a flagging Illinois economy.

Tax relief is much needed, but a more honest approach would’ve been for Springfield to get serious about reforming spending, which has ballooned by $13 billion in just six years. Now his “grocery tax repeal” likely will raise taxes substantially for many Illinois residents and businesses.

Pensions are the biggest drain on local government spending. Until the Illinois legislature implements meaningful pension reform, suburbs will be forced to raise taxes to cover their growing costs and begging for the state’s scraps.

Businesses and restaurant owners should encourage community leaders to reject proposals to implement local grocery taxes. Instead of adding to the tax burden, suburban communities should be looking for ways to attract new businesses to grow revenue that can be reinvested in the community to attract even more folks to share the burden.

Illinoisans already have been hurt by inflation. Suburban communities should be looking for ways to reduce those costs, not adding to them by taxing people’s groceries.

• Matt Paprocki is president and CEO of the Illinois Policy Institute.