Naperville could scrap grocery tax in favor of higher sales tax

Revenue is falling short of expectations from the grocery tax, which was enacted after Gov. J.B. Pritzker repealed the state grocery tax.

Some Naperville City Council members are already questioning the city’s decision to implement a 1% grocery sales tax after Gov. J.B. Pritzker repealed the same state tax in 2023.

Because the money from the state’s tax went entirely to local governments, the repeal put municipalities in a bad spot to make up for that lost revenue.

To address that, state lawmakers allowed local governments to adopt their own 1% grocery tax beginning Jan. 1, 2026. Naperville did so to avoid a projected $6.5 million budget shortfall.

What is the current status of Naperville’s grocery tax?

At the July 21 Naperville City Council meeting, Finance Director Ray Munch and Deputy Finance Director Traci Marrocco reported that revenue from the tax is below projections. Many retailers were not aware of the new Naperville tax, Munch said. The state is working with them to correct some of that as best as possible.

Naperville received $511,000 in its first remittance from the state and nearly $600,000 in June. The distributions are made on a delayed schedule.

What are council members proposing?

As the end of the statewide grocery tax loomed, the city council chose a local grocery tax over an increase in the home-rule sales tax because it was expected to provide a more stable source of revenue.

Now, council members are asking to put back on the table a 0.25-percentage-point increase in the city’s current 0.75% home-rule sales tax on general merchandise and restaurant meals. The tax does not apply to auto sales, groceries and healthcare items.

Councilman Ian Holzhauer requested that city staff prepare 2027 budget projections that include an option to eliminate Naperville’s grocery tax and replace lost revenue with a higher sales tax.

Are decisionmakers listening to constituents?

The discussion comes as taxes and the economy remain top concerns for Illinois residents who have the highest combined state and local sales tax in the Midwest. In a recent poll by M3 Strategies for the Illinois Policy Institute, more than half of respondents ranked high taxes among the state’s top two issues, while 41% cited the economy.

High sales taxes are especially harmful to small businesses, which generally have lower profit margins than large 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 increases the cost of living for working Illinoisans at a time where rising prices are a growing concern in the state.

Families deserve permanent relief at the checkout line rather than a city trying to get more revenue from them.