Illinois’ high sales taxes turn holiday shoppers into Scrooges
Illinois’ state and local sales taxes make shopping for gifts an expensive gesture of kindness every holiday season.
Holiday shopping receipts make a lot of Illinoisans walk out of stores grumbling “bah humbug” during what is supposed to be the season of joy, thanks to Illinois’ high sales taxes.
Illinois boasts the nation’s seventh-highest average combined state and local sales taxes, according to the Tax Foundation. The state’s sales tax rate is 6.25%, but numerous local sales taxes drove the combined statewide average to 8.74% in 2019, which residents pay on every purchase.
Chicago, a holiday shopping destination known for the Magnificent Mile and bright Christmas lights on State Street and Michigan Avenue, makes shoppers suffer even more. Shoppers leave the stores thinking twice about their gift purchases after paying a 10.25% sales tax. It’s the highest combined sales tax of any U.S. city with at least 200,000 residents, a title Chicago has held since the Cook County Board passed a sales tax hike in 2016.
Some gifts are even more expensive after they are given in Illinois. New smart phones are one of the most popular Christmas gifts. However, the state has the highest cellphone tax in the country. A typical Illinois family with four cellphones pays on average $374 annually in taxes on cell service.
New this season is a doubled gas tax making holiday visits more costly. Drivers visiting friends and family or taking vacations during the holidays will have to pay a 38-cents per gallon state tax atop other fees and sales taxes each time they fill up, unless they wait until they cross the state line. The new state gas tax costs about $100 more per driver a year. Also, Illinois is one of only seven states to charge residents state and local sales taxes on a gas purchase.
Next Christmas shoppers will pay more in online sales taxes as well. Beginning Jan. 1, online marketplaces that facilitate sales by third-party users, such as eBay and Etsy, will be required to collect Illinois’ state sales tax. Additionally, on Jan. 1, 2021, those third-party retailers will begin collecting local sales taxes in addition to the state sales taxes.
Changes can be made to lighten the sales tax burden on the state’s shoppers. For one, Illinois does not tax most services. If sales taxes were applied to both goods and services, the rate could be lowered. It would also provide a more stable income in times of economic downturn when consumers purchase less.
A broadening of the sales tax could also do more harm, however. Low-income people could not afford higher taxes on important services or expanded taxes to items such as food. Additionally, Illinoisans would have to make sure lawmakers do not use more tax revenue as a justification for more spending – as they have done with many tax increases.
Lawmakers must find a way to ease the tax burden on Illinois consumers. Nation-leading sales taxes hurt the state’s business climate, costing it jobs and driving consumers to shop in other states where costs are lower.