CHAMPAIGN – Illinois Governor JB Pritzker signed the state budget on Wednesday that eliminates the statewide, 1% grocery tax.
Because the tax was a source of revenue for local governments, the city of Champaign is looking for ways to offset a loss of about $2.7 million per year.
The city of Champaign is still working on its fiscal budget for next year.
According to Champaign Finance Director Kay Nees, staff plans to present the budget to the city council for final adoption on June 18.
The city council is leaning towards increasing the home-rule sales tax by 0.25%. On May 21, most councilors favored the sales tax over a hotel tax or a liquor tax.
“The city’s home-rule rate does not apply to purchases of groceries, purchases of medicine, [and] things along those lines,” Nees said. “It simply applies to the purchase of general merchandise.”
General merchandise includes items like clothing, electronics and paper products.
“The sales tax currently for the city of Champaign is 9%. However, of that 9%, 6.25% is the state sales tax rate,” said Nees.
With most of the sales taxes going to the state, the home-rule tax or the city’s share within that is 1.25%, which the city says is lower than the local rates in Urbana and Bloomington.
The city expects the tax increase to more than cover the loss. Revenue from the home-rule sales tax increase would amount to about $3.9 million annually.
Nees also said that customers may pay less in taxes overall.
“If you imagine you’re going through the grocery store, and you’re buying $50 worth of groceries, and then $50 worth of general merchandise,” said Nees. “In that instance, you would actually pay 37 cents less in tax, as you’re checking out at the grocery store, because of the fact that the grocery tax has been eliminated.”
The council plans to vote on the tax increase on June 18.
If passed, it would go into effect when the grocery tax cut does, on January 1.
