Naperville may increase local sales tax to offset grocery tax repeal

Naperville officials are leaning toward a home rule sales tax increase to help offset the loss of revenue from the elimination of a statewide grocery sales tax.

City council members on Tuesday voted 5-4 on a first reading of an ordinance for a 0.25% increase to the home rule sales tax with a two-year sunset clause. A final vote on the matter is expected in August.

Last year, Illinois Gov. JB Pritzker signed a law repealing a 1% statewide tax on groceries. The law allows municipalities to enact their own grocery tax to maintain the status quo.

Without a replacement tax, Naperville officials estimate the city would lose roughly $6.5 million in revenue. Both the home rule sales tax and grocery tax would generate about the same amount in annual revenue, Naperville Finance Director Raymond Much said.

Councilman Ian Holzhauer argued that a grocery tax impacts essential items while a home rule sales tax would largely affect discretionary spending.

“I just can’t get behind taxing people’s food when we have a choice,” Councilman Patrick Kelly said.

Kelly and Holzhauer were joined by Mary Gibson, Benjamin White and Ashfaq Sayed in supporting a home rule sales tax increase.

Mayor Scott Wehrli and council members Allison Logenbaugh, Nate Wilson and Josh McBroom supported the grocery tax.

The city’s financial advisory board also recommended the grocery tax in a 5-1 vote.

Logenbaugh noted residents are already paying the 1% tax and would not see a difference in their spending as they continue to pay $1 for every $100 spent.

A home rule sales tax increase would be a new expense, resulting in an additional 25-cent tax for every $100 spent at restaurants or in shops, which could be adversely impacted by the increased tax.

City officials also noted that those who receive SNAP benefits do not pay the grocery tax.

A grocery tax also would provide a more stable source of income than a retail sales tax, which often dips during economic downturns as shoppers cut back on discretionary spending.

“Doing the dance of increasing the home rule sales tax, hoping that it doesn’t impact our residents, is more of a risk than it is a true solution,” Wehrli said.