Illinois senators want new tax on services, higher sales tax on food, medicine

Austin Berg

Director of Content Strategy

Austin Berg
February 8, 2017

Illinois senators want new tax on services, higher sales tax on food, medicine

The proposal would be part of the Senate’s “grand bargain,” which also includes a multibillion-dollar income tax hike.

There’s a whole lot of tinkering going on down in Springfield.

Senate leaders continue to trickle out new wrinkles as part their “grand bargain.” The details are constantly in motion. But one element remains the same: Politicians want to take taxpayers for a ride.

The most recent news out of Springfield is that senators are considering hiking the sales tax on food and drugs, and adding a tax on some services.

The sales tax hike would reduce the overall sales tax rate to 5.75 percent from 6.25 percent. At the same time, however, the state would apply this new rate to items such as food, drugs and medical supplies, which currently come with a state sales tax of only 1 percent.

That’s a 475 percent sales tax hike on essential items too many Illinois families can’t afford already.

Services such as car repairs, landscaping and cable TV would also be taxed at the new 5.75 percent rate. Services in Illinois are currently exempt from the sales tax.

The Illinois Policy Institute has previously proposed modernizing Illinois’ tax code with a low, broad sales tax that taxes goods and services. But this plan only advocates for broadening the sales tax if lawmakers also eliminate Illinois’ personal and corporate income taxes, and create a partial sales-tax exemption for lower-income families. Government can’t tax both earning and consumption.

The Senate plan does the opposite. It whacks low-income families with higher medical and grocery bills, while also hitting taxpayers with a multibillion-dollar income tax hike.

Chicago is home to the highest sales tax in the nation among major cities. And Illinois’ combined state and average local sales tax rate is the highest in the Midwest, according to a recent report from the nonpartisan Tax Foundation.

In addition, 20 units of local government across the state raised sales taxes at the start of 2017.

Illinois is flirting with a recession. Some areas of the state find themselves in a recession already, according to Moody’s. And people who want to leave the state cite high taxes as their primary reason.

In short, hitting Illinoisans with even higher tax bills is a recipe for disaster. That’s why the Illinois Policy institute is proposing a balanced budget without tax hikes.

The reforms needed to achieve a fair budget are outlined in Budget Solutions 2018. This plan balances the budget without tax hikes through changes in five key policy areas:

  • Comprehensive property tax reform
  • Ending Illinois’ pension crisis through self-managed plans
  • Aligning AFSCME costs with what taxpayers can afford
  • Streamlining Medicaid spending
  • Higher education reform that prioritizes students over administrators

Illinois needs solutions that encourage families to plant roots here, and foster a climate where businesses want to set up shop. Further tax hikes would drive a stake in the heart of those goals.

Want more? Get stories like this delivered straight to your inbox.

Thank you, we'll keep you informed!