Gov. J.B. Pritzker’s $1.8 billion election-year tax relief package takes effect Friday. Here’s what’s in it
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The $1.8 billion tax relief plan Democratic Gov. J.B. Pritzker has been touting for months in ads for his reelection campaign takes effect Friday, offering temporary breaks at the gas pump and grocery checkout along with one-time checks going out to many taxpayers between now and the Nov. 8 general election.
The relief measures are kicking in as part of the $46 billion state spending plan for the budget year that begins July 1, and are sure to remain a major talking point for Pritzker and other Democratic candidates heading into the fall as they seek to maintain their dominance in Springfield in a year of record-setting gas prices and high inflation.
“In challenging times like these, it’s more important than ever to have a government whose first focus is on working families and those who are struggling and leadership that provides new and creative ways to deliver relief when you need it most,” Pritzker said Thursday during a news conference at the Thompson Center to promote the tax plan.
Pritzker said the tax relief was possible “because Democrats balanced the budget, eliminated the bill backlog and state government is now running a surplus.”
Republicans looking to expand their presence in the state legislature have criticized the tax relief as riddled with election-year gimmicks, even as many of them voted for the plan this spring to avoid going before voters with a record of having opposed tax savings.
The plan’s main permanent component — an increase and expansion of eligibility for the earned income tax credit for low- and moderate-income workers — doesn’t take effect until January.
Here’s a look at the tax breaks kicking in Friday.
Gas tax holiday
Under a measure approved with bipartisan support in 2019 to fund road and bridge projects across the state, the gasoline tax was scheduled to jump by 2.4 cents per gallon Friday to account for inflation.
Instead, drivers will continue paying the existing rate of 39.2 cents per gallon through the end of the year.
Critics have questioned whether they savings will provide meaningful relief. For a driver who fills up a 15-gallon tank once a week, for example, the savings would amount to less than $10 over six months.
As of Thursday, the average price of a gallon of gas in Illinois was $5.39.
The six-month freeze in the inflation-based increase also will result in drivers with two gas tax increases next year, one on New Year’s Day, when the freeze expires, and the regularly scheduled annual increase on July 1. The exact amount of the Jan. 1 bump will be determined by where inflation stands at the end of September.
The governor’s office estimates the total savings will be $70 million.
The law requires gas stations to post a sign about the tax freeze at pumps, a requirement retailers unsuccessfully fought in court as an infringement of their First Amendment rights.
Sales tax freeze on groceries
With food prices also on the rise because of inflation at levels not seen in decades, the relief plan gives shoppers a yearlong break from the 1% sales tax on qualifying grocery items. That’s the equivalent of $1 in savings for every $100 spent at the checkout.
The savings don’t apply to items such as pop, candy, prepared food, alcohol and tobacco, or grooming and hygiene products that are taxed at higher rates.
In all, the governor’s office estimates shoppers will save $400 million over the course of the year. That revenue usually flows through the state to local government bodies, but the state will make up the difference out of its budget.
Shoppers in the Chicago region will continue paying the portion of the tax on groceries that goes to the Regional Transportation Authority — 1.25% in Cook County and 0.75% in DuPage, Kane, Lake, McHenry and Will counties.
Back-to-school break
For 10 days in August, there will be a temporary reduction in the state sales tax for certain back-to-school items, including school supplies and clothing and shoes selling for less than $125 per item.
From Aug. 5-14, the sales tax on those items will be reduced to 1.25% from 6.25%, which the governor’s office estimates will save consumers $50 million.
Direct payments
The state will be sending one-time checks to individual income tax filers who earn less than $200,000 and married couples who earn less than $400,000.
These residents will receive $50 per taxpayer, plus $100 per dependent child for up to three children. Those rebates are expected to cost the state $685 million.
An estimated 6.2 million taxpayers qualify for payments based on 2021 state tax returns.
Checks and direct deposits are expected to begin going out the week of Sept. 12, and the state estimates it will take about eight weeks to get the money out to everyone who qualifies. That means the payments should be wrapping up right around Election Day.
Property tax rebates
In addition to direct payments, homeowners who filed state income tax returns jointly and earned less than $500,000, and individual filers who earned less than $250,000, will receive a one-time property tax rebate of up to $300.
The payment will be equal to the property tax credit taxpayers received on 2021 state income tax returns, up to a maximum of $300.
The state credit is equal to 5% of property taxes paid. So a homeowner who paid $5,000 in local property taxes will receive a rebate of $250.
The property tax rebates will cost the state an estimated $520 million.
The state will send the direct payments and property tax rebates automatically based on taxpayers 2021 returns. Taxpayers who received income tax refunds by direct deposit should receive the payments via the same account. Others should receive checks by mail.
Those who didn’t file a 2021 state income tax return but qualify for a direct payment, property rebate or both will be able to apply online at tax.illinois.gov.
