“The sales tax is falling short,” the study reads. “Illinois needs a more strategic and sustainable fiscal structure that delivers consistent and reliable revenue growth, efficient spending, and economic competitiveness.”

Illinois taxes the sale of goods and products but not consumer services. The groups argue including consumer services in the state tax base would generate up to $2 billion annually for the state, funds that could benefit struggling services such as education, transit and unfunded pension liabilities. The study found consumers are increasingly spending more of their income on services than goods, and sales tax revenue is not growing at the same rate as public costs.

Illinois is facing a $3.2 billion shortfall in the fiscal year that starts July 1, in part because pandemic-era federal funds that paid for an expansion of Medicaid have run out. The outlook could be even more precarious because of recent actions by the Trump administration to cut funding to the state.

While households are still spending more on goods, income spent on consumer services, excluding health care and housing, grew 2.5 times more than expenditures on goods over the last six decades. The report attributes this to goods being replaced by technology, such as consumers now downloading e-books, streaming movies and music, and storing files and photos in the cloud.

The Civic Federation came out with a similar study about a month ago where the group advocated for a number of reforms that included extending the sales tax to include consumer services, though not business to business services, while cutting the tax rate itself.

The February report said Illinois is among the minority of states that do not tax most services under the sales tax. The state taxes 29 of the 176 types of services that it could. On average, other states tax 62 types of services. Services such as plumbing, dry cleaning or haircuts aren’t taxed in Illinois, the Civic Federation said.

In the latest study, the group recommends an independent advisory panel to oversee the implementation, provide professional guidance and evaluate the sales tax’s performance over time. This panel would also be responsible for ensuring transparency and addressing any unintended consequences as they arise.