Chicago Considers $1.25 Package Delivery Tax
Ald. Gilbert Villegas (36th) has proposed a new ordinance for a $1.25 ground delivery tax on consumers in Chicago. This initiative aims to generate substantial revenue to combat the city’s pressing budget deficit, taking inspiration from similar measures implemented in Colorado and Minnesota.
Addressing Chicago’s Budget Challenge
Chicago City Hall is facing a significant budget deficit, prompting a search for new revenue streams. Ald. Villegas believes a ground delivery tax offers a viable solution, tapping into the growing trend of online shopping and home deliveries that put a strain on city infrastructure without adequately contributing to its upkeep.
The Proposed $1.25 Package Fee Explained
Under Ald. Villegas’s proposal, Chicago residents and businesses would incur a $1.25 tax for every package delivered to them, irrespective of the number of items within. The seller would be responsible for collecting and remitting this tax to the city on a monthly basis.
Key Exemptions
To mitigate the impact on essential goods, several categories of deliveries would be exempt from this tax. These include:
- Prescription and non-prescription drugs
- Medical appliances
- Health or personal hygiene products
- Groceries and food for immediate human consumption (e.g., Uber Eats, DoorDash)
Expected Revenue and Broader Benefits
Villegas estimates that this new tax could generate anywhere from $137.5 million to $275 million annually, based on an estimated 110 million to 220 million packages delivered in Chicago each year. This potential revenue significantly surpasses the $100 million anticipated from Mayor Brandon Johnson’s proposed corporate head tax, which has faced considerable opposition.
Beyond revenue, the proposal outlines three key benefits:
- Support Local Businesses: By adding a fee to deliveries, consumers might be encouraged to shop more at local brick-and-mortar stores, which pay property taxes and employ local residents.
- Reduce Traffic and Carbon Footprint: A potential decrease in the number of deliveries could lead to less traffic congestion and a lower carbon footprint in the city.
- Recapture Motor Fuel Tax Revenue: As more delivery trucks transition to electric vehicles, the city loses out on motor fuel tax revenue used for street maintenance. This delivery fee could help offset that loss.
Precedents: Colorado and Minnesota’s Delivery Fees
Chicago wouldn’t be the first to implement such a tax. Ald. Villegas highlighted similar fees in other states:
| Jurisdiction | Effective Date | Fee Amount | Key Conditions/Exemptions |
|---|---|---|---|
| Colorado | July 2022 (initially) | 28 cents per transaction | Retail sales of tangible personal property delivered by motor vehicle; smaller retailers exempt. |
| Minnesota | July 2024 | 50 cents per transaction | Deliveries valued at $100 or more; smaller retailers exempt. |
| Chicago (Proposed) | TBD | $1.25 per package | Exempts medical, groceries, and food delivery services; “on the purchaser.” |
Potential Uses for the New Funds
If passed, the substantial revenue generated by the ground delivery tax could offer several strategic options for the City Council. It could be used to:
- Eliminate or reduce Mayor Johnson’s contested $21-a-month-per-employee corporate head tax proposal.
- Restore the full advance pension payment, going above the actuarially required amount.
- Reduce the record $1 billion tax increment-financing (TIF) surplus currently earmarked for Chicago Public Schools.
- Lessen the proposed loan intended to cover major settlements and retroactive pay raises for Chicago firefighters.
Ald. Villegas argues that this tax is a necessary step to adapt to a changing digital economy, much like the mayor’s own justifications for taxing social media and online betting. “We have to figure out a way here how to capture revenue from a new type of service that is out there and has been out there for quite some time,” Villegas stated.
FAQ: Chicago’s Proposed Delivery Tax
- Who proposed the ground delivery tax?
Ald. Gilbert Villegas (36th Ward). - How much would the tax be?
$1.25 per package delivered in Chicago. - What types of deliveries are exempt from the tax?
Prescription/non-prescription drugs, medical appliances, health/personal hygiene products, groceries, and food for immediate human consumption (e.g., from Uber Eats, DoorDash) are exempt. - When would this tax go into effect?
The tax is currently a proposal and would need to be approved by the City Council before any effective date is set. - What is the primary reason for proposing this tax?
The main goal is to generate significant revenue to help Chicago City Hall address its large budget deficit and fund essential services.
This proposed delivery tax represents a significant shift in how Chicago plans to fund its essential services, encouraging residents to consider their shopping habits and their impact on the city’s economic health.
Chicago Considers Package Delivery Tax
