Would proposed grocery, gas and property tax breaks be big enough to help Illinoisans?

BY KELSEY LANDIS UPDATED FEBRUARY 04, 2022 12:38 PM

J.B. Pritzker this week proposed a set of temporary tax breaks aimed at helping Illinoisans struggling with record inflation and pandemic woes. But how much relief would the plan, which needs state lawmaker approval, actually provide if it goes into effect in the coming year? A 1% grocery tax would be suspended for a year and the gas tax would remain the same. Annual property tax breaks up to $300 would be available to individuals earning less than $250,000 or $500,000 for couples filing jointly.

A family that spends $1,000 on groceries per month would save $10 on their bill, and they might save a dollar or so at the gas pump. Pritzker’s plan would freeze the motor fuel tax at 39.2 cents per gallon. It was supposed to increase to 41.4 cents on July 1 to pay for infrastructure investments, Capitol News Illinois reported. On 12 gallons of gas at Thursday’s average unleaded price in Illinois of $3.59 per gallon, a driver would pay $43.08 to fill up, including $4.70 in tax. If the gas tax were to increase, the difference would be roughly 26 cents. A driver who fills their tank once a week at that price could see about a dollar a month in savings. $2 for 2 months

Republicans called the governor’s plan a “gimmick.” “I appreciate that the Governor somewhat recognized the need to get our fiscal house in order as well as the need to provide financial relief to our taxpayers,” said state Sen. Terri Bryant, R-Murphysboro. “However, the people of our state need more than his one-year, election gimmick relief proposals.”

Even if the savings are relatively small, “it’s an important relief for those families,” said Rick Funderburg, a public administration professor at the University of Illinois whose expertise includes tax incentives. Gas and grocery prices are abnormally high, and “any relief that can be brought” to them helps, he said. “Groceries being a necessity that we all have, that’s going to relieve the tax burden on low-to moderate-income families. Not every state taxes groceries for that reason,” Funderburg said. “It’s an essential part when we’re dealing with times of high inflation.”

Only 13 states of 45 with a sales tax collect taxes on groceries, according to Eric Figueroa, an analyst for the Center on Budget and Policy Priorities. The nonpartisan research institute focuses on reducing poverty and inequality. Today’s top headlines

Sign up for the P.M. Report and get the day’s biggest stories in your inbox.

SIGN UP This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.

People with lower incomes spend more on groceries for home consumption than those who earn more money, Figueroa found in a study using federal data. Grocery taxes naturally have a higher impact on low-income people. Eliminating the tax, even temporarily, “undoubtedly benefits to folks with lower and middle incomes,” he said.

Making the cut temporary might provide enough relief to tide people over until inflation subsides, Funderburg said. “The high rates of inflation that we’re experiencing right now will most likely soften. We’ve already seen some signs that’s happening,” he said. “So, that would be the justification for approaching this as a short-term fix rather than a long-term.”

Some of the remaining 13 states with grocery taxes are exploring eliminating it. In Kansas, Gov. Laura Kelly has proposed cutting the state’s 6.5% grocery tax rate, the second-highest in the country behind only Mississippi’s 7%. A bill lawmakers are considering in Mississippi would reduce it. “We think that getting rid of the grocery tax is good,” Figueroa said, “but we caution to make sure it’s not at the cost of making a bigger hole later.” Pritzker said the state would make up for lost revenue from the grocery tax, which goes to local governments.

The governor expects the state to have a $1.7 billion surplus at the end of this fiscal year in June, but how successful the state is going forward depends on how Illinoisans recover from the pandemic, Funderburg said. If downstate in particular sees sustained growth from opportunities such as infrastructure investment, there might be enough make a grocery tax cut permanent. “If we have a trajectory of long-running, sustainable growth, then I think we could easily do without something like the grocery tax,” Funderburg said.