Editorial: Return sales tax-collection overage to local agencies
Eight months ago, the new Illinois budget empowered the state to begin taking 2 percent off the top of the sales taxes it processes and returns to each community and government agency.
Through this handling fee, the state expected to amass about $5.3 million a month, or slightly under $64 million a year -- enough to cover the costs the Illinois Department of Revenue says it absorbs by taking in all the sales taxes generated in Illinois each month, then remitting the money back to the cities, counties, agencies and the state.
But as Jake Griffin writes this week, in the eight months the state has collected the fee, it is now on track to outpace the $64 million.
There are several reasons for this, and there are conflicting opinions on whether the state should be charging fees at all -- one government to another. What's clear however, is that the Department of Revenue should take whatever steps necessary to return the overages to the places from whence they came.
How they do it, is up to them.
Griffin reports that the fee is generating an average of $6.2 million each month in fees for the state. If that holds up, it'll mean $74.4 million over 12 months, or $10 million more than what the state said it needed to break even.
That $10 million won't make or break the bank of Illinois, but in many cases, a fraction of it will mean a great deal to the communities and agencies whose budgets are a great deal smaller and who have limited means of raising money.
One reason there is more money in sales taxes is that sales are generally up in Illinois. But there's another reason, too. One of the few ways a city can raise revenue is to hike its own sales tax. A few already have, largely in response to the new fee. This winds up with the state getting even more money in fees. The community gets more money too, along with a bad rap locally for raising taxes.
Every government agency in Illinois needs money, including the state. But $14 million in handling fees from the RTA has a much bigger effect on the RTA in terms of loss than $14 million means to the state in terms of gain. Schaumburg has paid $286,000 in fees in eight months. South Elgin has paid nearly $22,000; Lincolnshire $18,900 and Carol Stream $56,000. Many other agencies likewise are shouldering fees in the tens or hundreds of thousands.
None of this amounts to a windfall, and we aren't suggesting the state is gorging itself on local funds. But eight months ago, the state said it would be made whole by taking 2 percent of the sales taxes owed, and that $64 million would be enough. If it is reasonable for the state to collect a handling fee, then it is also reasonable for it to take what it needs and no more.