Chicago’s last change to its packaged liquor tax was supposed to raise $6 million. By June 30, it had cost the City $4 million. The Mayor’s answer is to raise the rate. Meanwhile, as of today, the State has made it illegal for liquor stores, convenience stores and breweries to sell hemp-derived THC beverages, a month before federal law requires it.

If the City and the State mean to support retailers who sell alcohol, they have an odd way of showing it.

Liquor sales have long been a dependable source of income for retailers, especially small convenience stores, and they are the lifeblood of independent liquor stores. That business is shrinking. U.S. spirits revenue fell 2.2% in 2025, and every major spirits category except ready-to-drink cocktails declined (Distilled Spirits Council). You would expect government to do what it can to help stores that are losing business. In Illinois, the opposite is happening.

The first punch: Chicago’s packaged liquor tax

In its 2026 budget, the City changed how it taxes packaged liquor sold for off-premise consumption. Instead of a per-gallon tax collected through wholesalers, package goods retailers now charge and remit a 1.5% tax on each retail sale, a system that took effect March 1 (Irish Liquor Lawyer). The change was expected to raise $6 million. Instead, by June 30 it had produced a $4 million drop in revenue (Chicago Sun-Times).

Mayor Brandon Johnson’s 2027 budget would raise the off-premise rate to 3%, which his administration projects will bring in an additional $13.8 million a year (Illinois Policy).

That projection ignores where many of these stores sit. Many small retailers on the South Side, in some of the city’s poorest neighborhoods, are a short drive from Indiana. Indiana taxes spirits at $2.68 a gallon. Illinois’s state rate alone is $8.55, more than three times as much. Add Cook County’s $2.50, and a bottle of spirits sold in a Chicago package store carries more than $11 a gallon in excise before the City’s percentage tax is even rung up at the register. That is more than four times the Indiana rate. In struggling neighborhoods, customers can only absorb so much, and a couple of miles over the state line is not far to go for cheaper alcohol.

The City has already watched one liquor tax change fall short of its forecast. Raising the rate again before anyone understands why risks sending more sales across the border and collecting less, not more.

The second punch: the State’s hemp beverage ban

As liquor sales shrink, hemp-derived THC beverages have been a lifeline for retailers and even craft brewers. Starting today, November 12, 2026, the Illinois Hemp Act treats any product with more than 0.4 milligrams of total THC per container as cannabis, which only licensed dispensaries may sell. That pulls these beverages from liquor stores, convenience stores and breweries. The State kept that date even after the federal deadline was pushed back to December 11, 2026, putting Illinois a full month ahead of Washington (Illinois Department of Revenue).

The Illinois Healthy Alternatives Association, which represents about 250 hemp businesses, has challenged the hemp ban in federal court in Chicago. No court has ruled yet. The State has agreed not to enforce the law against the plaintiffs and the association’s members until November 19, when the court will hear their request for a preliminary injunction.

That leaves every other retailer in Illinois without any assurance. Each must decide whether to pull these products from the shelves or keep selling them and risk enforcement. Even the protected businesses only know where they stand for one more week. Living in limbo is no struggling retailer’s happy place.

What should happen

The City should keep the off-premise rate where it is until it understands why this year’s change fell short of its forecast.

The State should, at a minimum, align its effective date with the federal December 11 deadline. A month may not sound like much, but for a store running on thin margins, it is a month of sales of a product that remains federally lawful, in the middle of the holiday season. Beyond that, the State should create a path for licensed liquor retailers, who already check IDs and answer to regulators every day, to sell low-dose beverages, rather than sending every customer to a dispensary.

Conclusion

The City and the State seem unaware of how their tax and regulatory choices land on retailers. To government, these numbers are lines in a budget. To retailers, they are a livelihood.