Naperville's newly implemented grocery tax is bringing in less money than expected, prompting city council members to consider scrapping it entirely in favor of raising the general sales tax, according to a July 2024 report from the Illinois Policy Institute. The city adopted the 1% grocery levy in January 2026 to close a projected $6.5 million budget gap after Illinois Governor J.B. Pritzker eliminated the state grocery tax in 2023. Now, just months into the new tax's life, officials are questioning whether it was the right move.
At the July 21 city council meeting, Finance Director Ray Munch and Deputy Finance Director Traci Marrocco disclosed that grocery tax collections have fallen short of projections. Naperville collected $511,000 in its initial payment from the state and close to $600,000 in June, according to the report. Munch explained that numerous retailers weren't aware of the new municipal tax, and state officials are working with them to fix the issue. The shortfall comes despite the city's decision to use the grocery tax instead of raising its home-rule sales tax, which officials had believed would deliver more reliable revenue. Councilman Ian Holzhauer has now requested that city staff draw up 2027 budget scenarios that eliminate the grocery tax and make up the lost money through a 0.25-percentage-point bump in Naperville's existing 0.75% home-rule sales tax on general goods and restaurant meals.
The debate unfolds as taxes and economic pressures dominate concerns among Illinois residents, the report states. In a recent M3 Strategies poll conducted for the Illinois Policy Institute, more than half of respondents listed high taxes among the state's top two problems, while 41% pointed to the economy. The report notes that Illinois residents face the highest combined state and local sales tax in the Midwest, and the state carries one of the nation's heaviest overall tax burdens. According to the authors, Illinois has the third-highest corporate income tax and ranks among the Midwest's least business-friendly tax environments.
The report argues that higher local sales taxes hurt small businesses especially hard because they operate with thinner profit margins than large corporations and have less capacity to absorb tax costs. Even when small retailers pass the full tax onto shoppers, the resulting higher prices make them less competitive. Raising local sales taxes further drives up the cost of living for working families in Illinois at a time when price increases are already a growing worry across the state, the report finds. The authors conclude that families need lasting relief at checkout rather than cities seeking additional revenue from them.