Illinois Cities Look to Save $500K in Sales Tax Fees

Two cities in Illinois (Bloomington and Normal) are banding together to oppose a recent law that has them paying a two percent collection fee on sales tax in their communities.  This fee costs the cities approximately one million dollars in local funds and opponents insist it is an unfair burden placed on the cities in an attempt at reviving a state budget that has long been out of control. 

Illinois finances began to crumble in 2015 amidst government infighting between Republican Governor, Bruce Rauner, and Democratic House Speaker, Michael Madigan.  There was a two-year time span when spending was unregulated, bills were unpaid, and Illinois' credit rating continued to plummet.  Other costs to the state such as cuts from public universities, an unstable social security system, and a $130 billion deficit in government pension funds made the situation even worse.

In an effort to stem this financial hemorrhaging, Illinois state government has implemented a budget that includes an increase in income tax and a heavily disputed fee for the collection of sales tax.  The mayor of Normal, Chris Koos, is working with the Illinois Municipal League on behalf of municipalities in the state to decrease the amount of this fee.  Their ultimate goal is to get rid of the collection fee completely, but they are starting by pushing legislation that would decrease the fee from two percent to 1 percent - saving Bloomington, Normal and McLean County $500,000.

One of the Municipal League's biggest concerns about the current law is the lack of options presented with it.  According to the current law, passed this summer, municipalities must pay this state-imposed collection fee and there is no option for local collection or any other opt-out process.  This law should be a convenience for cities in Illinois, but it is proving to be a burden that officials are getting tired of carrying.