Normally the end of the legislative session brings the relief of finality. But the Illinois business community may not be out the woods yet. Legislators still have to address a looming funding shortfall for mass transit before the end of the year, and they could be called upon to reopen the budget if there are drastic cuts in federal spending.
“We’re sleeping with one eye open,” says Lou Sandoval, CEO of the Illinois Chamber of Commerce.
Among the proposals that failed: a $1.50 surcharge on deliveries of food and other merchandise; a 10% tax on rideshares in the six-county metro area; a 10% tax on digital advertising. It was aimed at helping replace $771 million in pandemic-era federal funding that’s set to expire at year-end.
Several of the taxes are modeled on those tried elsewhere. Minnesota and Colorado have delivery surcharges. Maryland passed a digital-advertising tax four years ago.
Retailers and restaurants say the delivery tax is three times higher than Minnesota’s.
“When we heard $1.50, we were like ‘what?’” said Sam Toia, president of the the Illinois Restaurant Association. “We think $1.50 is way too high.”
He says such a charge would hurt restaurant sales because every 1% increase in takeout food prices reduces orders by 0.81%.
The restaurant association lobbied hard against the proposal, but Toia says he understands the state needs money for transit and other issues.
“We’re all ears. Let’s try to figure this out,” he said. “We’d rather be at the table than on the menu.”
The digital-ad tax was a general-revenue fix that appeared to be aimed at large technology companies such as Google, Meta and Amazon because it would be collected from companies with at least $125 million a year in annual sales in Illinois.
TechNet, a technology trade group, and other business groups lobbied against the tax, saying it ultimately would hurt small companies.
“A digital-ad tax would raise the cost of advertising online,” the group said in a letter to legislators last week, when rumors started swirling that the tax would be included in budget proposals. It passed the Senate but wasn’t called in the House.
“A tax on digital ads would likely be passed directly down the chain — meaning (small and medium enterprises) and their customers pay more,” TechNet said in the letter. “A digital-ad tax might sound like it targets ‘big tech,’ but in practice, it’s a regressive cost that squeezes the very businesses Illinois should be empowering."
Another potential proposal that could have hit some businesses hard was an idea to create a new rate class for large users of electricity, such as data centers. It was part of a broader discussion about the need to incentivize battery storage to make wind and solar power more feasible.
A proposal that was discussed but never formally introduced said those using more than 25 megawatts of electricity would be required to build or provide their own renewable source of power or be subjected to a rate six time higher than other users. Opponents argued that the rate was too high and the cutoff was too low because it would snare more than just mega-data centers.
“Large companies were like, ‘Illinois is doing what?’ ” says Mark Denzler, CEO of the Illinois Manufacturers Association.
The state, like many others, needs to find more sources of power for everything from AI data centers to manufacturers. Illinois still produces more power than it consumes, but that cushion is shrinking. Meanwhile, the state is looking to reduce its reliance on traditional carbon-based sources such as coal and natural gas. That problem hasn’t gone away.
The battles that played out over the weekend underscored the reality that, for the first time in years, legislators faced a tight budget as pandemic-era federal funding had dried up and a wobbly economy threatened tax receipts, which had been growing steadily.
Looming in the background is a financial crisis for mass transit, whose ridership still has not rebounded to pre-pandemic levels, and the state’s omnipresent pension deficit. Legislators have been adamant that better oversight of the transit agencies, which serve the city and suburbs, be imposed before new funding is provided. It’s a long-simmering debate that stokes some of the most intractable political resentments between the city, the suburbs and the rest of the state.
“This was one of the most challenging legislative sessions in recent memory,” said Jack Lavin, CEO of the Chicagoland Chamber of Commerce. “We commend the governor and legislators for making some tough decisions and engaging with stakeholders to achieve a balanced budget. In the end, the business community wants fiscal stability.”
He praised new economic-development incentives, saying they’ll create jobs. The chamber opposed the surcharges on rideshares, delivery and digital ads, saying they’ll hurt the economy by hitting consumers and businesses.
“Transit legislation didn’t pass,” he says. “There’s going to be work over the summer. The (governance) reform bill should definitely be looked at. I think there’s time. Everybody’s at the table.”
