More south and south suburban communities are looking to replace revenue they expect to lose starting Jan. 1 when the state 1% grocery tax goes away.
The Homewood Village Board voted Tuesday to approve a replacement tax, also of 1%, to effect in January. Hazel Crest officials discussed implementing a tax at a Village Board committee meeting Tuesday.
Nearly 190 communities across the state have so far enacted a tax to replace the state tax, according to the Illinois Department of Revenue.
Locally, that includes Blue Island, Chicago Heights, Crestwood, Evergreen Park, Markham, Oak Lawn, Richton Park and Tinley Park.
In adopting the replacement tax, communities contend consumers won’t notice a difference in grocery prices because the local grocery tax is simply replacing a state tax.
Gov. JB Pritzker signed a bill last year repealing the state’s 1% grocery tax, saying it hit poorer families harder. But the bill also allowed municipalities, which depend on the revenue, to implement their own tax.
Municipalities have until October to adopt their own tax, which would be collected and distributed by the state revenue department.
Homewood officials say they get about $650,000 annually from the state tax, or about 11% of their total sales tax revenue. The village said the loss of revenue would affect village services.
Hazel Crest discussed the tax at a committee meeting Tuesday. It was not immediately clear when it could be taken up at a Village Board meeting.
Hazel Crest officials said they took in $51,000 last year from the state tax and the year before the number was nearly $85,000.
Without a new revenue source, the village said it would have difficulty in honoring an economic incentive agreement with the owner of the Hazel Crest Center shopping center.
Under the agreement with Matanky Realty Group, approved in 2022, the village agreed to share in sales tax revenue generated by Teddy’s Fruit and Meat Market, a tenant in the center at 17531 Kedzie Ave.
The sales tax sharing is good for either eight years or when Matanky receives $300,000, according to the village.
Last month, Tinley Park trustees voted to approve the replacement sales tax.
Tinley Park estimates the elimination of the 1% state tax would cost the village about $3 million annually in lost revenue.
The Village Board voted May 6 to approve the 1% tax, which will take effect Jan. 1.
The state suspended the grocery tax for fiscal year 2022 to help fight rising inflation, but municipal leaders say losing the stream of revenue permanently forces them to consider cutting services, raising sales or property taxes, or implementing a local grocery tax.
llinois residents already pay the highest combined state and local taxes in the nation, at more than $13,000 annually, according to a recent report by WalletHub.
The south suburbs, which collectively receive more than $20 million in funding from the state grocery tax, will be hit particularly hard by the elimination of the state tax, Kristi DeLaurentiis, executive director of the South Suburban Mayors and Managers Association, told the Chicago Tribune.
Many towns in the south suburbs have little commercial base, she said.
Some areas also are food deserts, with no grocery stores to tax. To remedy the lack of fresh food, some municipalities have pledged part of their state grocery tax revenues to attract grocery stores, and are contractually obligated to come up with the money regardless if the state provides it.