In search of revenue: Sales tax becoming increasingly attractive option in Rockford area

Government officials searching for alternative revenue sources are increasingly turning to sales taxes.

In addition to the state's 6.25% sales tax on general merchandise, Rockford and other area governments including Loves Park and Machesney Park, have for years utilized a 1% sales take to pay for road and infrastructure improvements.

Winnebago County charges a 1% public safety tax that voters approved in 2002, and in March 2020, those same voters approved a 0.5% mental health sales tax.

Then in December, the Rockford School Board weighed the pros and cons of seeking a countywide sales tax to fund construction and technology needs as well as school resource officers, social workers and counselors at area schools. Later that month, State Rep. John Cabello, R-Machesney Park, a Rockford Police Department officer, brought up the idea of a statewide sales tax to fund public safety pensions.

"You have a real concern about property taxes, especially in Illinois," said State Sen, Seve Stadelman, D-Loves Park. said. "And so when a local government decides it wants additional revenue, they really try to avoid property taxes ... and really one of the only sources they have at their disposal is the sales tax. So if you're not going to go the property tax route, you have local governments that will look at the sales tax."

But sales taxes can also be regressive, Stadelman said, hitting middle and lower income families harder than the wealthy.

Other news: Who runs Winnebago County? At least one board member wants the issue raised again

On the hunt for revenue

Sales taxes vary by city and county across Illinois. Rockford shoppers pay an 8.75% sales tax for general merchandise or "Walmart tax," not including groceries or titled vehicles. Loves Park and Machesney Park have the same sales tax rate, but 9.75% in special business districts. It's 8% in Freeport, but 7.75% in Rockton and South Beloit.

Illinois has mandated that municipalities have public safety pensions at least 90% fully funded by 2040, straining municipal budgets across the state. A sales tax would be a way to have not only Illinois residents, but people who visit Illinois pay for police and fire pensions, Cabello said.

Although the idea is still being vetted, Cabello said it was possible that a sales tax for police and firefighter pensions could offset property taxes.

"It's not something that I'm proposing. It's something that the state has to look at," Cabello said. "We've got to find other revenue sources for police and fire pensions."

Too much of a good thing

Loves Park Mayor Greg Jury said his city does not utilize a property tax and relies on sales taxes — its single largest revenue source that generates as much as 40% of its general fund budget.

At some point too many sales taxes could be too much of a good thing, Jury said.

"My worry would be that we, you know, keep adding another sales tax for the police pensions, and we add another one for this or that," Jury said. "We've got the mental health tax. We've got all these things. And if you're going to keep adding, at what point do businesses say are we better off not coming to this area or to the state of Illinois ... I don't think it's pro-business."

Sales tax can be a viable alternative to property taxes if done properly, said Rockford Mayor Tom McNamara.

Sales taxes should be used to reduce the property tax burden on area residents, and government bodies must be transparent about their spending.

"The big ‘but’ here is it also needs a couple of things if you do a sales tax," McNamara said. "One, it needs a true commitment to reduce the property tax burden. So you're not just doing the sales tax and increasing your property taxes. Second, I'm a big believer that those sales taxes really need to be transparent ... like what we do with our road tax. We have numerous meetings every year, a book is published every year about how the dollars are being spent and you can even find out which contractors are doing the work."

Jeff Kolkey writes about government, economic development and other issues for the Rockford Register Star. He can be reached at  (815) 987-1374, via email at jkolkey@rrstar.com and on Twitter @jeffkolkey.

This article originally appeared on Rockford Register Star: More sales taxes could be coming to Rockford area to generate revenue