Illinois Governor Signs Budget, Imposing New Tax on Social Media Companies Based on Their Monthly Users

Social media companies will soon have to pay a new tax in Illinois based on how many monthly users they have.Illinois Governor JB Pritzker signed the state’s new $55.9 billion budget on Tuesday, claiming it would help residents “weather the economic destruction and chaos” of President Trump’s administration. The budget includes $100 million for food assistance, $250 million for affordable housing programs, and a $350 million increase in school funding, as well as a back-to-school tax holiday on school supplies and clothing. To help pay for the extra spending, lawmakers in Illinois added a tax on social media companies, which they expect will bring in around $200 million, into the budget. The tax rate for social media companies would depend on how many monthly users they have. Platforms with between 100,000 and 499,999 users would pay 10 cents for every user every month. Platforms with at least 1 million users would pay 50 cents per user. The statewide plan mirrors a tax implemented by Chicago. City officials expected that the tax would bring in $31 million in 2026, but within the first four months of 2026, the tax has brought in $16.4 million. If that trend continues, the total revenue for 2026 would be $49.2 million. Chicago’s tax is facing a legal challenge from a tech trade group, NetChoice, which argues the tax is “discriminatory” against social media companies as it notes the law has exemptions for “bona fide news websites[s]” and “single-purpose community groups for education or public safety.” The lawsuit also alleges that the tax violates federal prohibitions on state or local governments imposing discriminatory taxes on electronic commerce. Some tax analysts and free speech advocates have criticized Illinois’s new tax. A senior fellow at the Tax Foundation, Jared Walczak, told the Sun the new law is “shoddily drafted” as it “never defines users,” questioning whether people who visit a social media website without creating an account would be considered a user. He also said the tax uses an “expansive and ill-defined definition of social media” that could apply to messaging, dating, and fitness apps.The text in the budget regarding the tax describes social media platforms as a platform where users “create, share, and view user-generated content” that “can be viewed by other users of the medium” and “primarily serves as a medium for users to interact with content generated by other users of the medium.”Mr. Walczak said the law is “unconstitutionally vague,” arguing that it discriminates against interstate commerce and violates the federal prohibition on imposing discriminatory taxes on electronic commerce. He called the tax a “dream for lawyers” but a “nightmare for everyone else.”Mr. Pritzker told reporters that he believes the state’s tax will withstand a legal challenge.

Illinois Governor Signs Budget, Imposing New Tax on Social Media Companies Based on Their Monthly Users

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