Consumer Taxes in Chicago: Increases and Updates for 2023

December 30, 2022

The Civic Federation annually releases a report on consumer taxes in the City of Chicago, which will be released next month. Consumer taxes are tied to the use or consumption of certain goods and services that can be charged directly to consumers through retail transactions or passed on to consumers by businesses or governments. Consumer taxes in Chicago are imposed at various levels of government, including the City of Chicago, Cook County, the State of Illinois and the federal government. This blog highlights changes in four consumer taxes since the Civic Federation’s 2022 Consumer Taxes Report was released in March 2022.

For a summary of the changes in consumer taxes taking effect last year, see the Civic Federation’s 2022 Blog Post on Consumer Taxes.

Tax Changes

The following taxes will undergo changes in 2023:

Motor Fuel Tax, State of Illinois – The Governor’s FY2023 Proposed Budget called for a one-year delay in the annual increase on the State’s Motor Fuel Tax, but was shortened in the enacted budget to six months. Per changes made in 2019 via Public Act 101-0032, the State automatically increases taxes on motor and diesel fuel on July 1 of each year by the percentage increase, if any, of the Consumer Price Index based on 12-month data from the United States Department of Labor ending each March. Part of the FY2023 budget legislation delayed the automatic increase that would have gone into effect July 1, 2022, to December 31, 2022, and changed the amount of the increase to the increase in the Consumer Price Index in the 12 months ending in September 2022. Between July 1, 2022, and December 31, 2022, the State Motor Fuel tax rate remained at $0.392 per gallon of gasoline and $0.467 per gallon of diesel fuel. Effective January 1, 2023, through June 30, 2023, the State Motor Fuel Tax will be $0.423 per gallon of gasoline and $0.498 per gallon of diesel fuel. The tax will resume its previous annual CPI increase on July 1, 2023.

Wheel Tax, Cook County – The Cook County Board passed an ordinance in September 2022 that will permanently end the County’s vehicle registration fines and fees on June 30, 2023. The Cook County Wheel Tax is currently collected only in unincorporated areas of the County. To read more about the repeal, see the Federation’s blog post.

Other Updates

Additionally, the following updates have taken place since the release of the Civic Federation’s previous annual Consumer Tax Report:

Grocery Sales Tax, State of Illinois – As part of the State of Illinois FY2023 Budget approved in April, the legislature approved a one-year suspension of the State Grocery Tax on qualifying items through Public Act 102-0700. The State normally taxes groceries at a rate of 1%, which includes food to be consumed off store premises and transfers the revenue to counties and municipalities. Importantly, this suspension does not include local taxes on groceries through the City of Chicago and Regional Transportation Authority (RTA). The 1% tax on prescription and non-prescription drugs is also not impacted by the suspension. The FY2023 State of Illinois enacted budget included funding to local governments for foregone revenue due to the grocery tax suspension. The suspension was effective July 1, 2022 and will expire on June 30, 2023.

Back to School Sales Tax Holiday, State of Illinois – The State also created a 10-day sales tax holiday on back-to-school items and select clothing from August 5, 2022, to August 14, 2022. This reduced the State Sales Tax rate to 1.25% for the ten-day period, which represented a 5.0% discount from the State’s normal sales tax rate of 6.25%.

Transportation Fund, Cook County – Cook County announced in its FY2023 Executive Budget Recommendation that it would create a new special purpose Transportation Fund to account for transportation tax revenue. The change was made in order to comply with Article IX, §11 of the Illinois Constitution, also known as the “Safe Roads Amendment” or the “Transportation Lockbox Amendment.” The Transportation Fund will include certain revenues that were previously collected in the General Fund. Included in the new Transportation Fund are some taxes that are described in this report. The list of taxes now transferred to the Transportation Fund includes the Wheel Tax, County Use Gas Tax, Diesel Fuel Tax, Parking Lot & Garage Operations Tax, New Motor Vehicle Tax, and Non-Retailer Transaction Use Tax. These revenues were previously used to support public safety offices. See the Civic Federation’s analysis of the FY2023 Cook County budget for more information.

As noted above, the Civic Federation will be releasing its full 2023 Report on Selected Consumer Taxes in the coming weeks.