Group pushes tax on Amazon deliveries, digital ads in final budget talks
With the budget facing a potential $1.2 billion deficit, some ideas on the table include taxing deliveries from companies such as Amazon and digital ads.
With a potential $1.2 billion budget deficit, some ideas for new revenue from taxpayers includes a tax on digital ad revenue and retail deliveries. Both taxes are likely to add further strain on already overburdened taxpayers and businesses.
Digital ad proposal
A coalition including the Chicago Teachers Union is pushing for tax revenues made on corporations delivering ads. The proposed 10% tax on digital advertising revenue would come from corporations making over $150 million from digital ads. The union projects $895 million in extra revenue in 2026.
How do digital ad taxes work?
If a business pays a platform such as Facebook to run ads for itself then a higher tax on Facebook’s advertising revenue would simply lead to Facebook raising the prices of that ad service.
The business either has to pay higher costs to run the same number of ads or reduce its ad spending thus lowering its reach and traction. Either way, the business bears the cost which might pass down to consumers through higher costs of goods and services.
Ongoing challenges
The coalition cites Maryland as an example of successfully passing this legislation but the state faces numerous lawsuits alleging it violated the First Amendment and the Internet Tax Freedom Act. Illinois will also likely face costly litigation and legal uncertainty. Maryland revenue has already fallen short of expectations and that money would need to be paid back if lawsuits are successful.
Digital ads are a critical tool for companies to market themselves. Businesses spent over $740 billion on digital advertising across the globe last year alone. Local shops, restaurants, gig workers, nonprofits and even political campaigns depend on these platforms to raise awareness and drive growth. Political campaigns have been some of the biggest spenders on digital ads in recent years.
In just the past election cycle, the Harris campaign spent over $182 million on digital ads between Google and Meta. If lawmakers enact such a tax, Illinoisans should pay particular attention to how this political spending is treated and whether politicians choose to exempt their own political spending from being taxed.
Delivery taxes
A delivery tax is a fee imposed on the delivery of goods to consumers and is typically levied based on the value of goods delivered. While no specifics have been presented yet, these taxes tend to get passed on to consumers, especially on those who rely on deliveries. This can have especially negative effects on people with disabilities, elderly and those in transit deserts.
Other state examples
So far, two states have imposed delivery taxes, Colorado and Minnesota. Colorado delivery tax went into effect in 2022. Each delivery incurs a 27-cent fee and applies to any retailer that makes over $500,000 in annual in-state gross revenues.
These policies will likely work as a blueprint for Illinois to enact its delivery tax. While they may seem modest, they lay a foundation that can evolve such as reductions of dollar thresholds to cover future budget deficits by lawmakers. Transparency can be another issue. Minnesota requires these taxes to be reported on a dedicated tax line. Without such a requirement in Illinois, taxpayers may not have visibility on what they are paying.
Conclusion
Rather than relying on new taxes that hit consumers and small businesses, state leaders should prioritize sustainable budgeting and long-term financial stability. If not, the state will continue to lose residents to domestic migration and lag in economic growth and employment.