Pritzker to propose grocery tax relief, extra 5% property tax rebates to fight inflation

Gov. J.B. Pritzker will propose a roughly $1 billion package of tax relief measures aimed at mitigating the impact of inflation on Illinois consumers when he gives his budget address Wednesday.

The "Illinois Family Relief Plan" would suspend the 1% grocery tax for one year, suspend the automatic inflation-adjusted increase in the motor fuel tax and provide a 5% property tax rebate to qualifying property owners.

"At the same time of what has been record growth in the economy, and dramatically different revenue forecasts for the state, we're experiencing a surge of inflation," Deputy Gov. Andy Manar said in an interview with Capitol News Illinois. "And this decline in purchasing power has hit working families in the state, and the governor recognizes that."

According to the U.S. Bureau of Labor Statistics, the 12-month inflation rate in the United States in December stood at 7%, the highest in nearly 40 years. That included a 29.3% increase in energy prices and a 6.3% increase in food prices.

Manar declined to provide many details of the forthcoming budget proposal except to say that it will follow the same pattern of previous budget proposals.

"I'm not going to give any specifics today because those are the governor's to propose on Wednesday," he said Sunday. "But the governor is going to continue to take the state down the path that he's established, which is controlled spending, paying off debt, getting caught up on our bills, and working with legislators and working with people to solve big problems."

But Manar said Pritzker believes the state can afford to provide some tax relief due to its improved fiscal management and better than expected revenue growth.

In November, the Governor's Office of Management and Budget revised its revenue forecast for the current fiscal year upward by $1.7 billion based on strong growth in income and sales tax receipts.

"And this is all occurring during the ongoing budgetary challenges of COVID-19," Manar said.

In Illinois, consumers do not pay the regular retail sales tax on groceries but instead pay a flat 1% "grocery tax," which goes to local governments.

Pritzker's proposal would suspend that 1% tax for a year while using state funds to reimburse local governments for the revenue they otherwise would have gotten, at an estimated cost of $360 million.

In 2019, the General Assembly passed a 10-year, $45 billion capital improvements program known as "Rebuild Illinois." It included an increase in the motor fuel tax along with a provision for automatic increases each year to adjust for inflation.

That tax is scheduled to increase on July 1, and Manar estimated it would have gone up about 2 cents per gallon. But he said the governor will propose holding off on that increase in the coming year, freezing the state tax for one year at its current 39.2 cents per gallon for gasoline and gasohol, and 46.7 cents per gallon for diesel.

That would cost an estimated $135 million that the state otherwise would take in.

Manar said that would have no impact on the Department of Transportation's plan for road improvements in the upcoming fiscal year and would not affect the financing of any bonds that are backed by fuel tax revenue.

Finally, Manar said, Pritzker will propose offering a 5% property tax rebate to property owners, which would be in addition to the 5% property tax deduction they can take on their Illinois income tax returns. The rebate would be available to only those who qualify for the property tax credit.

That is estimated to cost about $475 million.

Pritzker is scheduled to deliver a combined budget and State of the State address at noon Wednesday, Feb. 2. It can be viewed live on the General Assembly's audio-video page, https://ilga.gov/houseaudvid.asp.