Illinois local sales tax fee generating more than expected
ARLINGTON HEIGHTS, Ill. (AP) — The Illinois Department of Revenue’s new administrative fee is outpacing budget expectations, generating almost $50 million during its first eight months of collection.
Municipalities, counties and regional government agencies must pay a 2 percent fee to process their local sales taxes, the Daily Herald reported . The funds go toward maintaining the Revenue Department’s computer system, processing collections, coordinating refunds and distributing taxes.
The state originally predicted the fee would generate about $5.3 million a month, but a department report shows that it’s generated a monthly average of almost $6.2 million.
An overall increase in sales taxes across the state has contributed nearly $2 million more revenue than expected, the report said. The bump in revenue may be due to an increase in tax rates rather than increased spending on goods.
Naperville and Glen Ellyn recently increased local sales tax rates to balance out the shortfall created by the fee and other revenue losses.
“The impact of the Local Government Distributive Fund reduction coupled with the sales tax administrative fee caused significant stress on our budget, which we dealt with by cutting services and adding certain tax rate increases,” said Kevin Coyne, a city councilman for Naperville.
One of the agencies hit hardest by the fee is the Regional Transportation Authority, which lost nearly $14.2 million over the eight month period. In addition, the state has withheld $40 million in funds, RTA officials said.
“These cuts were a major contributing factor in the need for fare increases and service reductions as they were implemented, in order for the service boards to present balanced budgets,” said Susan Massel, a spokeswoman for RTA.
Some critics view the fee as a “pass-through tax” on consumers. Democratic Rep. Anthony DeLuca of Chicago Heights proposed cutting the fee in half and said he ultimately wants to eliminate it.
Information from: Daily Herald, http://www.dailyherald.com