Illinois sales taxes near top in U.S.

Chicago will have one of the highest big-city rates in the country when the transit tax inches up Aug. 1.

Illinois’ high sales taxes are about to get higher in the Chicago area.

Across Illinois, the combined state and average local sales tax is 8.98%, according to the Tax Foundation. That’s eighth-highest in the U.S. and highest in the Midwest.

The state did end its 1% grocery tax Jan. 1, though more than half the local governments in Illinois have one.

For over a decade Illinois has been one of the nation’s least competitive states in terms of sales tax. The last time Illinois placed outside the top 10 highest sales tax rates was 2013.

Of the states bordering Illinois, Missouri has the highest combined average rate, but it’s still over a half a percentage point lower than Illinois’.

Wisconsin in particular stands out in comparison with Illinois, with a combined average rate of 5.72%, and Kentucky is not far behind, at 6%.

As the regional leader in sales tax, Illinois incentivizes residents to make major purchases in states where sales taxes are lower. While that’s not feasible for all Illinoisians, those living near state borders can save a considerable amount by choosing not to spend their money in Illinois.

Sales taxes are especially high in the Chicago area, with the city of Chicago having a combined sales tax rate of 10.25%.

Four categories make up Chicago’s sales tax:

• 6.25% statewide sales tax.
• 1.25% city sales tax.
• 1.75% Cook County sales tax.
• 1% Regional Transportation Authority tax.

That will tick up Aug. 1, when the city’s RTA sales tax rises to 1.25%, part of the transit bailout that will see the RTA replaced by the new Northern Illinois Transit Authority. Chicago will then have a sales tax rate of 10.5%, one of the highest in the country among big cities.

For certain activities in Chicago, patrons face even higher taxes. A couple eating out downtown must pay Chicago’s restaurant tax and the Metropolitan Pier & Exposition Authority’s food and beverage tax on top of state and local sales taxes.

High sales taxes are especially harmful to Illinois small businesses, which generally have lower profit margins than large national corporations and thus less wiggle room to absorb sales taxes. Even if a mom-and-pop shop passes the entire tax onto its customers, the higher prices make the business less attractive to shoppers.

Illinois already has one of the highest state and local tax burdens in the nation. The state’s corporate income tax is third-highest, and its tax code is among the Midwest’s least friendly for businesses.

Increasing local sales taxes only further increase the cost of living for working Illinoisians at a time where rising prices are a growing concern in the state.