Shoppers paid extra $1 billion in local sales taxes
Shoppers in Illinois paid more than $1 billion in additional sales taxes to nearly 300 towns last year, and that could rise if Gov. Bruce Rauner gets his way on a plan to cut municipalities' share of income taxes.
Last year, 296 towns imposed a sales tax on top of the state's 6.25 percent, Illinois Department of Revenue data show. That's up from 185 towns eight years ago. And elected officials in 173 of those towns have the authority to raise sales tax rates without asking voters for permission.
Lake in the Hills is one of those towns with so-called home-rule powers. The village imposed a local sales tax in 2006. Now, shoppers there are charged three-quarters of a cent on most purchases, and the tax generated almost $1.3 million last year for the village. Raising that rate could be one option if the state cuts back local funding.
"If the governor or legislature knocks a million-dollar hole in our budget, it will be up for discussion," said Lake in the Hills Village Administrator Gerald Sagona. "But the first thing we'd do is look where we'd cut and save money."
Lake in the Hills stands to lose about $1.4 million if Rauner's plan goes through, which is about 10 percent of the village's general fund revenue, Sagona said. The village would take in about $400,000 for every quarter-cent sales tax increase, which the village board could enact without voter approval. There's no cap on local sales tax rates for home-rule towns.
Increasing the sales tax rate is a much "easier sell" than raising property taxes because sales taxes are charged to nonresidents as well, Sagona said. That's why municipal sales taxes have become increasingly popular and local governments haven't been shy about increasing rates.
Money raised by municipal sales taxes has risen 51.8 percent since 2006, while the amount all Illinois towns receive from a separate 1 percent share of the state's sales tax has increased just 11.9 percent, according to the revenue department figures.
The extra municipal sales taxes represent 22 percent of the $4.7 billion in total sales taxes paid to counties, all Illinois municipalities, the Regional Transportation Authority and a few other local government entities in 2014.
Many towns have recently raised the local sales tax rate to shore up shortfalls elsewhere. Batavia did just that last year.
The city's sales tax rate doubled to 1 percent, making the city's total sales tax rate 8 percent. The extra money will help cover the city's operating costs and "defray some of the cost of our electricity rates," Mayor Jeff Schielke said.
"This is what happens when you approve home-rule powers," said Jim Tobin, founder of Taxpayers United of America, a Chicago-based group that fights tax-hike measures throughout the country.
Previously, Batavia had to get voters' approval to impose a sales tax. That was in 2006 when the city needed to borrow to pay to rebuild two fire stations. In 2010, Batavia's population growth above 25,000 residents allowed home-rule authority. There was no need to ask voters to raise the sales tax in 2014 instead of finding places to cut costs.
"Everybody always talks about cutting, but when it comes time to cut, they can't agree where or what to cut," Schielke said. "And I don't know that we've got a lot of fat here."
It's become harder to dodge these municipal sales taxes.
From 2006 to 2014, the number of towns charging home-rule sales taxes increased from 134 to 173. But the highest growth came in the form of voter-approved municipal sales taxes, which were charged in 123 towns last year, up from 51 in 2006.
"That does drive tax avoidance, especially if you live on a border of one city that has that extra tax and one that doesn't," said Michael Lucci, managing director of jobs and growth at the Illinois Policy Institute, a conservative organization that tracks and analyzes government spending. "However, as more communities begin levying these taxes there are just fewer avoidance places, but there's always Wisconsin and Indiana."
It also doesn't take much to approve a municipal sales tax, critics complained.
"You can get an extreme minority who will likely benefit from such a sales tax to approve that tax," Lucci said.
That was the case in Gilberts, population 7,100, when 180 voters cast ballots in favor of a half-cent sales tax in 2011. Only 51 ballots were cast against the measure.
Gilberts officials pushed the sales tax in an effort to raise money for a road resurfacing project that cost about $1.9 million, Village Manager Ray Keller said. But the tax won't go away when that debt is paid off.
"The reason it's set up this way is because that debt will be paid off and we will be ready for our next major resurfacing project in 2021," Keller said.
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Municipal sales tax rates in fiscal year 2014ADDISON 1.00% 8.25%
ALGONQUIN 0.75% 7.75%
ARLINGTON HEIGHTS 1.00% 9.00%
AURORA 1.25% 8.25% (DuPage, Kane, Will counties)
AURORA 1.25% 8.50% (Kendall County)
BATAVIA 1.00% 8.00%
BENSENVILLE 1.00% 9.25% (Cook County)
BENSENVILLE 1.00% 8.25% (DuPage County)
BLOOMINGDALE 0.50% 8.75% (Business districts)
BLOOMINGDALE 0.50% 7.75% (Outside business districts)
BOLINGBROOK 1.50% 8.50%
BUFFALO GROVE 1.00% 9.00% (Cook County)
BUFFALO GROVE 1.00% 8.00% (Lake County)
BURR RIDGE 0.25% 8.25% (Cook County)
BURR RIDGE 0.25% 7.25% (DuPage County)
CAROL STREAM 0.75% 8.00%
CARPENTERSVILLE 2.00% 9.00%
CHICAGO 1.25% 9.25%
CRYSTAL LAKE 0.75% 7.75%
DARIEN 1.00% 8.25%
DEER PARK 0.25% 8.25% (Cook County)
DEER PARK 0.25% 7.25% (Lake County)
DES PLAINES 1.00% 9.00%
DOWNERS GROVE 1.00% 8.25%
ELGIN 1.25% 9.25% (Cook County)
ELGIN 1.25% 8.25% (Kane County)
ELK GROVE VILLAGE 1.00% 9.00% (Cook County)
ELK GROVE VILLAGE 1.00% 8.00% (DuPage County)
ELMHURST 0.75% 9.00% (Cook County)
ELMHURST 0.75% 8.00% (DuPage County)
GENEVA 0.50% 7.50%
GILBERTS 1.00% 8.00%
GLEN ELLYN 1.00% 8.25%
GLENDALE HEIGHTS 1.00% 8.25%
GURNEE 1.00% 8.00%
HANOVER PARK 0.75% 8.75% (Cook County)
HANOVER PARK 0.75% 7.75% (DuPage County)
HINSDALE 1.00% 9.25% (Cook County)
HINSDALE 1.00% 8.25% (DuPage County)
HOFFMAN ESTATES 1.00% 9.00% (Cook County)
HOFFMAN ESTATES 1.00% 8.00% (Kane County)
ITASCA 0.50% 7.75%
KILDEER 0.50% 7.50%
LAKE IN THE HILLS 0.75% 7.75%
LAKE ZURICH 0.50% 7.50%
LINCOLNSHIRE 0.50% 7.50%
LOMBARD 1.00% 9.25% (Business district)
LOMBARD 1.00% 8.25% (Outside business district)
LONG GROVE 1.00% 9.00% (Business district)
LONG GROVE 1.00% 8.00% (Outside business district)
MCHENRY 0.50% 7.50%
MOUNT PROSPECT 1.00% 9.25% (Business district)
MOUNT PROSPECT 1.00% 9.00% (Outside business district)
MUNDELEIN 1.00% 8.00%
NORTH AURORA 0.50% 7.50%
OAK BROOK 0.50% 8.75%
OAKBROOK TERRACE 1.00% 9.25% (Business district)
OAKBROOK TERRACE 1.00% 8.25% (Outside business district)
PALATINE 1.00% 9.00%
PARK RIDGE 1.00% 9.00%
PROSPECT HEIGHTS 0.50% 7.75%
ROLLING MEADOWS 1.00% 9.00%
ROSEMONT 1.25% 9.25%
ROUND LAKE BEACH 0.50% 7.50%
SCHAUMBURG 1.00% 9.00% (Cook County)
SCHAUMBURG 1.00% 8.00% (DuPage County)
SLEEPY HOLLOW 0.50% 7.50%
SOUTH BARRINGTON 1.00% 9.00%
SOUTH ELGIN 0.50% 7.50%
ST. CHARLES 1.00% 8.00%
STREAMWOOD 1.00% 9.00%
SUGAR GROVE 1.00% 8.00%
VILLA PARK 0.50% 8.75% (Business district)
VILLA PARK 0.50% 7.75% (Outside business district)
VOLO 1.00% 8.00%
WARRENVILLE 1.25% 8.50%
WAUKEGAN 1.25% 8.25%
WEST CHICAGO 0.75% 7.75%
WEST DUNDEE 1.50% 8.50%
WHEATON 1.00% 8.25%
WHEELING 1.00% 9.00% (Cook County)
WHEELING 1.00% 8.00% (Lake County)
WINFIELD 0.50% 7.75%
WOOD DALE 1.00% 8.25%
WOODRIDGE 0.50% 8.75% (Cook County)
WOODRIDGE 0.50% 7.75% (DuPage and Will counties)
Source: Illinois Department of Revenue
Note: Total sales tax rate includes multiple taxing bodies.