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Illinois Tax-Free Holiday

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The state of Illinois could lose up to $60 million during its tax-free holiday. It's the first time the state has given the tax break, even though it's billions of dollars in debt.  Illinois' current sales tax is 6.25%.  During the tax holiday, 5% will be shaved off.  That's the state's portion.  So, shoppers will still pay 1.25%, which is the city's cut. The plan is to stimulate declining sales tax revenue.

"We believe it's going to encourage a lot of people from the other side of the river to come to the Illinois side of the river to purchase good for back to school," says State Senator Mike Jacobs. But with an estimated loss of $50 to $60 million during the 10-day holiday, how can the state make up the money? Jacobs says the hope is that people will spend more. "Some people believe that by actually encouraging people to come into the store they'll actually spend more money and the state of Illinois can actually gain dollars instead of loose dollars," adds Jacobs.

With the state billions of dollars in the red many think $50 to $60 million is a drop in the bucket. And adding to the problem won't help. "Of course the state being in the financial situation as it is any sales they don't receive does not help them in the global picture," says Mayor John Thodos, East Moline, IL.

The 1.25% sales tax people will pay is meant for the municipalities. But since only clothing and shoes under $100 and some school supplies qualify, some city leaders think the tax-free holiday will only help a little. Thodos adds, "With as many disclaimers and restrictions I don't know how large of an impact it could be."

And they have to wait and see if the state follows through on it's promise to pay the cities back the tax money. Thodos says, "As long as the portion we normally get comes through that wouldn't be bad."

The Illinois holiday does include school supplies, which Iowa's tax-free weekend does not. So, cities are hoping people crossing the river for breaks on binders, notebooks, crayons and calculators will add up. "I think it does equalize and level the playing field to that extent, so you won't have as many Illinois people going to Iowa to make back to school purchases," according to Thodos.

Now, another big difference from Iowa's sales tax holiday is Iowa does not charge any sales tax.  But, the tax break has been offered for 11 years, so cities prepare for the loss of revenue. Iowa's sales tax weekend is Friday and Saturday, August 6th and 7th.  Illinois' is from August 6th through the 15th.

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