Illinois’ new budget ends statewide grocery tax

The new state budget eliminates the 1% grocery tax, placing Illinois with 37 other states by 2026. But the bill gives municipalities the option to implement their own tax without voter approval.

Illinois lawmakers are putting an end to the 1% statewide grocery tax as part of the $53.1 billion state budget for fiscal year 2025.

But city leaders might be bringing it right back.

The change doesn’t take effect until Jan. 1, 2026. Local governments will be able to institute their own 1% tax either on groceries or a local sales tax without holding a referendum.

Eliminating the grocery tax had municipal leaders complaining it would hurt their budgets. State leaders were not giving anything up with the change because the tax only went to local governments. The option for municipalities to add their own tax was a compromise.

Illinois will finally join the other 37 states that don’t have a state grocery tax. It was the only state among the 10 most populated with a grocery tax.

Illinois Policy Institute polling showed 70% of voters supported eliminating the grocery tax. Illinoisans saved an estimated $360 million from a one-year suspension of the statewide grocery tax during fiscal year 2022.

Even though Illinois House Democrats hold a supermajority, it took three rounds of voting May 29 to reach the minimum 60 votes in favor of the record $53.1 billion budget for fiscal year 2025. It comes with $1.1 billion in tax hikes, meaning the grocery tax savings will quickly be eaten.