Chicago residents and businesses would pay $1.25 for every package they have delivered — whether from Amazon or another business — under a proposed ground delivery tax that could generate as much as $275 million a year.
Ald. Gilbert Villegas (36th), chair of the City Council’s Committee on Economic and Capital Development, wants cash-strapped Chicago to follow the trail blazed by Colorado and Minnesota, which have imposed similar delivery fees.
Villegas’s ordinance calls for a ground delivery tax of $1.25 per package that would be imposed “on the purchaser of the tangible personal property being delivered…without regard to the number of items within” each package.
The seller would collect and remit the tax to the city on a monthly basis or be liable for the tax, plus penalties and interest, the ordinance states.
Packages that include prescription and non-prescription drugs, medical appliances, health or personal hygiene products, groceries and food for immediate human consumption would be exempt from the tax.
Villegas estimated that the tax would generate much more than the $100 million a year that Mayor Brandon Johnson is counting on raising from his embattled proposal for a corporate head tax.
The benefits to Villegas’ measure would be three-fold.
Consumers determined to avoid the tax could shop at brick-and-mortar stores, generating more business for those smaller outfits that are fighting for survival. They could lessen the number of deliveries, reducing traffic and the city’s carbon footprint.
And with more delivery trucks shifting from gas to electric, Chicago would at least begin to recapture some of the revenue lost to a motor fuel tax used to repair and rebuild city streets.
“There’s about 110 million to 220 million packages delivered a year in Chicago. A modest fee of $1.25 could generate anywhere between $137.5 million to $275 million a year of new revenue,” Villegas said. “If people don’t want to pay the $1.25 package fee, I would encourage them to go to the brick-and-mortar [stores] and support the actual stores that pay property taxes and employ people.”
A similar ground delivery fee was considered to help fund the $1.5 billion mass transit bailout eventually passed by state lawmakers, but the fee was dead on arrival in the Illinois House.
To prevent a similar backlash, Villegas said, “We’re exempting medical, we’re exempting groceries and we’re exempting Uber Eats and DoorDash-type deliveries. So this is strictly on packages.”
If a City Council majority goes along with the idea, Villegas said the tax windfall could be used to eliminate the proposed, $21 a month per-employee head tax that Gov. JB Pritzker, business leaders and more than half the City Council either want to reduce or eliminate altogether.
It could also be used to: restore the full advance pension payment over and above the actuarially required amount; reduce the record $1 billion tax increment-financing surplus Johnson is using to rescue the Chicago Public Schools; or minimize the proposed loan to bankroll major settlements and retroactive pay raises for Chicago firefighters.
Johnson’s senior adviser has defended the $16.6 billion budget by claiming that taxing social media, cloud computing and online sports betting confront the “existential challenge” posed by an economy that is “shifting to the digital world.”
Villegas used a similar argument to justify the ground delivery tax.
“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 said.
According to Villegas, Colorado imposed a retail delivery fee in July, 2022 of 27 cents per transaction on “retail sales of tangible personal property delivered by motor vehicle.” A year later, the fee was increased to 28 cents a package, but smaller retailers were exempt.
Minnesota’s retail delivery fee was imposed on July 1, 2024 at a rate of 50-cents-per-transaction on deliveries valued at $100 or more. That state also has an exemption for smaller retailers.