New Illinois grocery tax elimination a potential revolving door for Sauk Valley shoppers

DIXON – Illinois shoppers could have more money at the checkout lane in 2026 when the state eliminates its 1% grocery sales tax – if their local governments do not replace it.

Gov. JB Pritzker included eliminating the state’s grocery sales tax as part of his $53 billion state budget proposal for the newly started fiscal year, and the Illinois General Assembly included it in the budget it passed in May.

Pritzker called the tax “regressive” during his State of the State and budget address in February, adding that he hopes eliminating it will ease the burden working families feel from increased inflation.

“If it reduces inflation for families from 4% to 3%, even if it only puts a few hundred bucks back in families’ pockets, it’s the right thing to do,” Pritzker said.

According to the Center on Budget and Priority Policies, Illinois is one of 13 states that pays a state grocery tax. That changes on Jan. 1, 2026, and although the move will save shoppers money at the register, it is their municipalities that will feel the squeeze.

Dixon City Manager Danny Langloss said the city is projected to lose about $500,000 annually once the tax is eliminated.

“That revenue goes directly into our general fund and is used for operating purposes,” Langloss said. “It pays for employees, equipment and capital expenses but does not go for roads or other major projects.”

The Dixon City Council still is determining the effect that eliminating the tax will have on the city, Langloss said, and it has not started discussing options to make up the lost revenue. He said the council will take the next year to evaluate the situation, including legislation that the city hopes will drive additional online sales tax revenue.

Sterling City Manager Scott Shumard said Sterling also uses that money for its general fund and stands to lose between $500,000 and $750,000 a year.

However, the tax repeal came with a compromise: all municipalities – including non-home-rule units that typically don’t have the authority to up their sales tax without voter approval – will have the authority to introduce their own grocery tax without taking it to the voters.

“The council will be considering the option to maintain the tax after the Illinois Municipal League finalizes a model ordinance for municipalities,” Shumard said. “The soaring cost of fire equipment and police wages to retain and attract good officers make it impossible to absorb the loss without substantial cuts to daily operations.”