Illinois Ends State Grocery Tax, Allowing Local Governments to Reimpose It

Illinois Gov. J.B. Prtizker speaks at a press conference in Chicago, Ill., on Aug. 4, 2021. (Scott Olson/Getty Images)

Illinois Governor JB Pritzker has signed a bill that will put an end to the state’s 1 percent grocery tax, reassigning responsibility for the tax to local governments, which can choose to forego the revenue it generates or reimpose the tax locally without having to get voter approval.

When Pritzker signed House Bill 3144 into law an Aug. 5, Illinois joined the other 37 states that don’t have a state grocery tax.

“Every dollar counts as families fight inflation and rising prices,” Pritzker said in a statement. “I’m proud to sign HB 3144 into law today—putting money back in the pockets of Illinoisans by permanently eliminating the state grocery tax.”

Americans in the Midwest, including Illinois, spent an average of $5,231 per year on grocery bills in 2022, per the latest regional data from the Bureau of Labor Statistics.

The U.S. Department of Agriculture estimates that grocery prices rose 5.0 percent in 2023, the latest year of available data, meaning the average Illinoisan spent $5,493 on groceries last year—and so stands to save around $50 a year thanks to the state grocery tax repeal.

However, shoppers won’t feel the change for some time as Illinois’ new law doesn’t go into effect until Jan. 1, 2026.

And while shoppers stand to benefit from the repeal, local governments face the prospect of budget shortfalls, since the state grocery tax income goes to local governments and not the state.

The new law shifts the responsibility of levying the tax to local governments, which can either reinstate it of choose not to do so—foregoing the revenue and cutting services.

To make it easier for local governments that don’t have home rule status to reimpose the tax, the law gives them the option of reinstating it by ordinance, without having to ask voters in a referendum.

Under Illinois law, non-home rule municipalities have limited taxation authority and must ask voters for approval when imposing new taxes. Home rule units, by contrast, have broad authority to impose taxes without having to seek voter approval because they either adopted home rule status by referendum or, in case of those with a population over 25,000, they obtain home rule status automatically.

The measure Pritzker signed into law authorizes non-home rule municipalities to reimpose the 1 percent grocery tax without a referendum. It also gives them the authority to impose an up to 1 percent sales tax without having to seek voter approval.

A similar Republican-backed bill that would have used money from the state’s general fund to cover lost revenue for municipalities failed to pass the state legislature.

Illinois state Sen. Andrew Chesney, a Republican, criticized the Democrat-sponsored bill, arguing in an op-ed that by eliminating the referendum requirement for non-home rule units, the measure undermines voters’ ability to have a direct say in local taxation in their community.

“As the State of Illinois continues to put more pressure on local units of government, it all but guarantees higher taxes at the local level, which will be much easier to accomplish with the elimination of the voter referendum,” Chesney wrote.

Democrats who backed the measure, such as Illinois House Speaker Emanuel Welch, have argued that the move empowers local governments to decide whether to impose the tax or let residents keep more of their earnings in their pockets.

Of the 13 states that still have a state grocery tax, Mississippi has the highest at 7 percent, while Arkansas has the lowest at 0.125 percent, according to the Tax Foundation.