Why Illinois consumers will soon pay more for groceries
Get ready to spend more at the grocery store.
The yearlong suspension of the state's 1% tax on groceries ends July 1.
The tax respite was intended to help reduce the cost to Illinois consumers as inflation drove grocery prices to all-time highs.
However, the tax hiatus ends at a time when groceries are even more expensive than before, according to a U.S. Department of Agriculture report from last month that showed food purchased at supermarkets for consumption at home cost 7.1% more in April of this year than a year ago, just before the grocery tax was suspended.
The Illinois Department of Revenue estimates consumers saved about $185 million between July 2022 and March 2023. The full effect of the tax break won't be known until September, when June's tax receipts are finalized, agency officials said.
Some critics argue the tax should remain suspended.
“Illinoisans have seen little to no relief at the grocery store, and food costs remain very high due to inflation,” said state Sen. Don DeWitte, a St. Charles Republican. “Legislation was filed this year to make the state sales tax suspension on groceries permanent, but Democrats blocked that bill and never allowed it to be heard.”
DeWitte also accused Democrats of instituting the tax suspension to curry favor with voters.
“The tax suspensions last year were politically motivated and were nothing more than a tool Democrats used to ingratiate themselves with voters heading into an election,” he said.
During the state's recent budget talks, there was no mention of maintaining the tax suspension, legislators on both sides of the aisle acknowledged.
“This was always contemplated to be temporary,” said state Rep. Anna Moeller, an Elgin Democrat. “It was meant to provide relief during extraordinary times.”
It was also meant to cause no harm.
The tax generated by grocery sales is collected by the state but distributed back to the municipality or county where the transaction took place. But instead of forcing those local governments to lose out on revenue, the state reimbursed towns and counties using federal COVID-19 relief dollars.
Grocers still are required to report sales to the state, then the state sends 1% of those sales to the towns and counties to make them whole.
And because grocery prices now are higher, local governments have been seeing more money from the reimbursement.
“It's not a significant jump, but we have seen more revenue,” said Rachel Mayer, Naperville's finance director.
In 2022, Naperville collected $4.54 million from grocery taxes or reimbursements, a 4% increase from the year prior, which Mayer said presumably was due to inflation.
Rob Karr, president of the Illinois Retail Merchants Association, said revenues from all types of sales taxes are up because of inflation, not just groceries. However, there always is a tipping point where consumers are forced to cut back on purchasing when prices get too high. Grocery stores usually are not hit as hard as other retail establishments, though, because everyone has to eat.
“It's usually cheaper to cook it yourself than go out, so people will still shop for groceries and cut back elsewhere,” he said. “It would also be a big difference if it were a 10% tax coming back and not 1%. We don't expect this will affect grocers much.”
Illinois is among 13 states that taxes groceries. The 1% rate is one of the lowest among those states. Kansas, Idaho, Tennessee and Virginia also temporarily lowered or eliminated grocery taxes in the past year.
Illinois' 1% grocery tax also only applies to items meant to be consumed off site, and it doesn't apply to candy, soda, liquor or cannabis-infused foods, which are taxed at the state's 6.25% sales tax rate or higher.
Non-consumable goods such as paper towels, food storage containers, household cleaning items and personal hygiene products also are subject to regular sales tax rates.