Illinois Governor J.B. Pritzker on Wednesday delivered his 2023 Budget proposal and State of the State speech. The election year speech celebrated the improved fiscal condition of Illinois, a nearly $1.8 Billion budget surplus, and proposed $1 Billion in temporary, one year, tax breaks.
In his speech, Pritzker introduced his “Family Relieve Plan”.
The tax proposals include a 1-year suspension of the 1% sales tax on groceries. The State of Illinois long ago eliminated the sales tax on groceries. The existing 1 percent tax revenue goes to local municipalities. The Governor proposed reimbursing those local governments for the lost revenue. The proposal is estimated to cost the State $135 million to backfill those revenues to local governments.
In addition, the Governor proposed suspending the 2.2 cent increase in the Motor Fuel Tax that is scheduled to go into effect on July 1. The annual indexed CPI increase is intended to account for annual increased construction costs. Suspending this increase is expected to save motorists $360 million next fiscal year. However, the State of Illinois has issued Bonds that are dependent upon that revenue. Trade Unions and Road Builders have already derided the proposal and have offered an alternative to suspend (or eliminate) the sales tax on Motor Fuel. The sales tax on Motor Fuel is not dedicated to the Road Fund, and therefore not obligated to bonds issued to finance construction projects.
Furthermore, Governor Pritzker proposed doubling the property tax exemption on your State income tax returns. Illinois homeowners are currently allowed to claim 5% of their property tax payments as a deduction on their Illinois Income Tax liability. Pritzker is proposing to double that deduction to 10% of property tax payments.
In addition to the “Family Relief Plan” tax suspensions, Pritzker also committed to reinvesting $35 million into the Main Street, downtown revitalization, program. The Main Street Program enables small businesses to apply to the Illinois Department of Economic Opportunity for direct grants to invest in their businesses. Pritzker also proposed suspending licensing fees on restaurants, bars, and other small businesses impacted by COVID.
Most importantly, Governor Pritzker committed a “Substantial” amount of COVID relief funds to payoff the State’s $4.5 Billion Unemployment Insurance deficit. Illinois has $3.5-$4.0 billion in COVID funds remaining, uncommitted. NFIB is cautiously optimistic by the Governor’s commitment to “substantial” use of the federal funds and looks forward to continued negotiations on the $4.5 Billion problem. Any balance in the Trust Fund’s debt remaining after the COVID Funds are used could potentially be entirely covered by increased taxes on employers.