Chicago Implements New Local Taxes Under 2026 Budget

Chicago has begun collecting several new local taxes following the rollout of its $16.6 billion city budget, enacted on Jan. 1 after a contentious fight between the City Council and Mayor Brandon Johnson. The budget took effect even without the mayor’s signature after aldermen rejected major parts of Johnson’s original proposal and approved a revised revenue plan.

One of the most noticeable changes for residents is a higher checkout bag fee. Shoppers will now pay $0.15 per paper or plastic bag, up from $0.10. Retailers must remit most of the fee to the city, though customers can avoid the surcharge by bringing reusable bags.

Chicago also activated its new sports betting tax on Jan. 1. Legal sportsbooks operating within city limits now face a 10.25% tax on adjusted gross revenue from wagers placed by Chicago residents. Major operators — including DraftKings and FanDuel — have sued the city, arguing Chicago lacks authority to impose its own betting tax. Although companies withdrew a request for an emergency injunction, broader legal challenges are expected to continue.

The new levies were adopted after aldermen stripped out a proposed corporate head tax, opting instead for smaller targeted taxes to help close the city’s budget gap. Supporters say the plan distributes the financial burden across different economic activities and provides predictable revenue for core services. Critics warn the measures could disproportionately impact lower-income residents and disrupt local businesses.

City revenue officials and retailers are now adjusting compliance systems as Chicago begins enforcing the updated tax framework throughout 2026.