Bottle racket: Illinois’ high alcohol taxes blow up cost of Independence Day celebrations

Ahead of Independence Day, Illinoisans near the state border exercise their freedom to purchase alcohol in low-tax neighboring states.

Americans spend $1.6 billion just on beer and wine for their Independence Day celebrations. But at Illinois’ liquor stores, patrons are free to pay some of the highest alcohol taxes in the Midwest. Or not.

Illinois’ excise tax rates on booze vary depending on the type of alcohol, with each higher than that of most neighboring states. This puts border-town convenience stores at a disadvantage: Bob Myers, president of the Associated Beer Distributors of Illinois, has pointed out that Illinois loses millions each year to cross-border alcohol purchases. The Wine and Spirits Distributors of Illinois has estimated state coffers have lost $20 million to $30 million in tax dollars from wine sales to neighboring states.

Illinois taxes beer at 23 cents per gallon, wine at $1.39 per gallon and liquor at $8.55 per gallon. That doesn’t include general sales taxes, or federal and local excise taxes on alcohol.

Nebraska and South Dakota are the only states in the Midwest to tax beer at a higher rate than Illinois, while Illinois’ tax on wine is second-highest among Midwestern states, only surpassed by Iowa. And Illinois’ tax on distilled spirits ranks second-highest in the Midwest after Michigan and third-highest nationwide.

The retail price of alcohol comes with the federal and state excise taxes baked in. Added onto that price tag are state and local sales taxes, of which the Land of Lincoln averages highest in the Midwest.

Some municipalities heap local excise taxes onto that retail price. The city of Chicago, for example, tacks an additional tax of 29 cents per gallon onto beer, and Cook County levies another 9 cents per gallon. Purchasing hard liquor in Chicago, consumers will incur a combined local alcohol tax of $5.18 per gallon – with $2.68 per gallon levied by the city and $2.50 per gallon by the county – on top of state and federal alcohol taxes.

All told, Chicagoans stocking up for Independence Day will be hit with four layers of excise taxes – federal, state, county and city alcohol taxes – in addition to state and local sales taxes.

Gov. J.B. Pritzker nearly hammered Illinoisans with higher alcohol taxes across the board to help pay for his $45 billion capital plan. However, the proposal to hike taxes on beer, wine and spirits by 50% was excluded from the plan signed by the governor. Instead, a doubled state gasoline tax, $1-per-pack increase on cigarettes and other taxes greeted Illinoisans in time for Independence Day.

On a holiday meant for celebrating freedom, Illinoisans will surely exercise theirs – by voting with their feet for more affordable spirits. But by encouraging partygoers to spend their money elsewhere on alcohol, gas and smokes, Illinois’ sobering tax climate dries up its retailers’ cash registers and its own state coffers.