Chicago mulls keeping grocery tax after state moves to eliminate it

As the state of Illinois prepares to eliminate a statewide tax on groceries, the city of Chicago could join dozens of suburbs in keeping the levy.

That 1% tax will be eliminated on January 1 on the state level, but so-called “home-rule communities” of 25,000 or more residents were given the option to keep the tax, which was distributed back to cities by the state while it was being collected.

Cities only have until October to decide whether to opt in to keeping the tax in place, and the city of Chicago is leaning toward doing just that.

According to state law, the tax is levied on food that is not intended to be consumed on the premises where it is purchased, with exceptions for food purchased via SNAP benefits.

Many suburbs have opted to keep the tax in place to stave off potential revenue losses, with Chicago Mayor Brandon Johnson saying that the city would stand to lose up to $80 million in revenue in the next year if it goes away.

Johnson emphasized that the 1% tax is already in place, and that Chicago residents would not see a corresponding increase in their grocery costs as a result.

“The city of Chicago will not enact its own grocery tax. The grocery tax already exists. There is a process in which the collection of the grocery tax is now being placed in the responsibility of municipalities,” he said at a recent press conference. “We’re not creating a grocery tax. We’re just creating a process by which we can collect it.”

The state’s grocery tax was temporarily suspended in July 2022 as part of a budget agreement reached in the wake of the COVID-19 pandemic. The move was aimed at reducing costs amid rapid inflation of grocery prices, but it was only a temporary one, going back into effect in 2023.

Illinois Gov. J.B. Pritzker announced in his State of the State address that the tax would be eliminated on Jan. 1, 2026 under provisions of the new fiscal year’s budget, and that move was approved by the General Assembly.

The terms of the legislation allowed communities to determine whether they wanted to keep the 1% tax in place, and dozens have done just that, including Cicero, Berwyn, Des Plaines and Downers Grove.

According to the Chicago Tribune, more than 150 communities statewide have passed measures to keep the tax in place and to collect the revenues.

Critics of the tax call it regressive, and argue that it would disproportionately burden lower-income households.

“When you raise the grocery tax, a tax on food at home, people will shift to restaurant food purchases,” University of Illinois Professor Elizabeth Power said.

Power also warned that such a move could discourage healthy eating habits, having cascading impacts down the line.

Chicago’s City Council will continue to hold meetings on the measure, and has until Oct. 1 to determine whether it will keep the tax in place past Dec. 31.