Dixon City Council approves local grocery tax to combat potential losses from state eliminating tax

DIXON – The Dixon City Council approved an ordinance Monday to instate a 1% grocery tax after Gov. JB Pritzker’s August legislation that will repeal the state’s grocery tax Jan. 1, 2026.

Along with the tax repeal, the new legislation gives all municipalities – including non-home-rule units that typically don’t have the authority to up their sales tax without voter approval – the authority to introduce their own grocery tax without taking it to the voters.

“In my opinion, this is purely a political move,” Dixon Mayor Glen Hughes said Monday. “The tax does not impact the state at all.”

The revenue generated from the current state tax goes directly to the municipalities. For Dixon, the revenue goes into the city’s general fund and is used for operating purposes, which includes things such as equipment and capital expenses, Finance Director Becky Leslie said.

“There’s never a situation where we want to put anything like this on the ballot unless it has to be done,” council member Chris Bishop said. “The state once again, as mentioned, has made a move that does not hurt them; it comes out of the cities and municipalities.”

Without the tax, the city stands to lose about $609,000 annually and would have to make some significant cuts to services or to community support, Hughes said.

Another option would be to increase real estate taxes within the limits of the state-imposed tax caps, which is something Hughes said the city has been working to reduce.

According to a PowerPoint presentation by Leslie during Monday’s meeting, fiscal 2023 and fiscal 2024 are the first years that the estimated real estate tax on a $100,000 home has been less than $800.

Even though the tax for fiscal 2024 is about a $33 increase from fiscal 2023, “we’re still substantially down over the last several years,” Hughes said.

Other Illinois municipalities already have passed their own local grocery tax, including Highland, Martinsville and Central City, according to illinoispolicy.org.

The ordinance for the new local tax was unanimously approved and will go into effect Jan. 1, 2026, after the state-imposed tax is officially removed.

“We’re already paying the tax, so it’s not going to be anything new for us, and it’s going to keep the city progressively moving forward,” council member Dennis Considine said.