May 15, 2025

Illinois Lawmakers Face Budget Shortfall as Session Nears End – New Service Tax Proposal on the Table

With just over two weeks remaining in the legislative session, Illinois lawmakers are under increased pressure to finalize a state budget amid growing economic uncertainty.

Earlier this week, Governor Pritzker’s budget office lowered revenue projections for the upcoming fiscal year by $536 million. At the same time, the Governor’s proposed FY26 budget includes $590 million in new spending—bringing the total to $55.2 billion.

To cover the shortfall and increased spending, lawmakers are now considering new taxes. One major proposal is a new statewide service tax of 6.25%—which would make it the highest such rate in the country. 

Notably, the proposal would make dealers responsible for collecting several new service taxes, including vehicle repairs, (including batteries, tires, and oil changes along with general repairs), vehicle washing, and towing—directly impacting auto dealers and their customers. This could increase repair costs and discourage service visits at a time when affordability is already a concern for many consumers.

The tax would apply to more than 80 every day and business services that will increase the cost of operating your dealership, including plumbing, landscaping, communication services, carpentry, painting, and electrical repairs, photography, janitorial services, sign construction and installation,  telecommunication services, and software subscriptions (SaaS).     

We are strongly urging legislators to reject this broad new tax plan. Expanding Illinois' tax base in this way would pile onto what is already the highest overall tax burden in the nation, making it even harder for families and businesses to stay and grow in our state.

As always, we will continue to monitor developments closely and advocate on behalf of our members. Please stay tuned for further updates as budget negotiations unfold in the final stretch of session.

Full List of Proposed Taxed Services