Illinois holiday shoppers pay sales taxes as high as 11.5%

Sales taxes up to 11.5% will greet some Cook County shoppers this holiday season. Illinois averages 8.85% in sales taxes statewide, slightly more than last year and the seventh highest nationwide.

Holiday shoppers in Illinois can expect to pay an average 8.85% in combined sales taxes for gifts this holiday season, the highest sales tax in the Midwest and the seventh highest in the nation.

Chicagoans will pay even more. Shoppers in Illinois’ largest city pay 10.25% in combined sales taxes on each present. That costs shoppers more in state and local sales taxes than they would pay in 97% of other Illinois communities.

It could be worse: Shoppers in the Cook County communities of Harvey, Harwood Heights, Matteson and Richton Park will pay the most in sales taxes statewide for presents this holiday season: 11.5%

Holiday shopping nationwide is projected to reach its highest levels in the past two decades during November and December of 2024. The National Retail Federation predicts up to $989 billion in potential sales.

But high taxes can actually end up costing cities because of lost revenue thanks to shoppers travelling to lower-cost locales to make purchases, according to research from the National Bureau of Economic Research.

A Journal of Economic Psychology survey of Chicago residents similarly found city shoppers traditionally made major purchases in the suburbs or online to avoid high sales taxes.

But even Illinois’ online shoppers must pay their hometown’s full sales tax for presents, thanks to the “Leveling the Playing Field for Illinois Retail Act.” It requires online retailers to charge local sales tax rates to customers.

Lawmakers have options to reduce sales tax on the purchase of gifts. One way is to extend state and local taxes to the price of services.

Most services in Illinois are generally not taxed. That means state residents pay more sales taxes on a carton of eggs than to lease a private jet. More evenly distributing taxes between goods and services could help lower the overall tax rate.

Another fix is to address Illinois’ nation-leading public pension crisis with state constitutional reform. Illinoisans pay the nation’s second-highest property taxes, as well as high local sales taxes, to cover growing contributions to our $70 billion in local pension debt. That debt is in addition to the $143.7 billion owed to the statewide public pension systems.

Constitutional pension reform, alongside a more balanced tax system, would provide Illinoisans with necessary financial relief while putting more money back into their pockets. It might even convince Illinoisans to shop locally for their holiday gifts rather than taking their money and tax revenue to another town or another state.