Mental Health Sales Tax Raises $11.2M in First Year

McHenry County's new mental health sales tax brought in $11.2 million in its first full fiscal year, slightly more than the property tax levy it was designed to replace.

In its first full year, the tax brought in just over $11.15 million, according to county officials. The property tax levy it replaced had collected about $11 million the year before. The new funding source slightly outperformed the old one.

In a March report by Claire O'Brien in the Northwest Herald, County Board Chair Mike Buehler called it "a win-win," saying voters "eliminated a property tax levy and replaced it with a fairer, more sustainable sales tax." The numbers support the first half of that claim. The second half is more complicated.

The March 2024 referendum passed with about 53% of the vote: 18,004 yes, 16,265 no. It was not a landslide.

The pitch was straightforward. Replace the Mental Health Board's property tax levy with a 0.25% county sales tax. Homeowners would see a line disappear from their tax bills. The cost would spread across everyone who shops in the county, including visitors and pass-through traffic.

Supporters argued that property taxes hit homeowners disproportionately, especially seniors on fixed incomes. A sales tax would broaden the base. The county eliminated the full $10.975 million levy when the sales tax kicked in on July 1, 2024.

The Mental Health Board would continue to administer the funds.

The first monthly receipts arrived below expectations, as O'Brien reported that October. Officials had projected roughly $1 million per month. The first check came in at just over $800,000.

The problem: county leaders had included car sales in their revenue estimate. State law exempts vehicle purchases from local sales taxes.

The shortfall created what board leaders described to the Northwest Herald as a "greater crisis" in early 2025 as the Mental Health Board scrambled to adjust its budget. Programs that had been funded by the old levy faced potential cuts during the transition.

“Somebody dropped the ball and it wasn't us.”

Mike Baber, Mental Health Board member, on the revenue estimation error

By the end of fiscal year 2025, the numbers had recovered. The $11,156,562 total exceeded the old levy by about $182,000.

A $182,000 margin is 1.7% above the old levy. But it held through a year without any major retail expansion in the county. Sales taxes tend to track consumer spending, so the revenue should grow with inflation and economic activity without requiring referenda or rate adjustments.

Annual revenue for Mental Health Board

McHenry County, MC708 Board, Shaw Local

For comparison: the old property tax levy had been relatively flat for years, constrained by the state's Property Tax Extension Limitation Law (PTELL). The sales tax has a higher natural growth ceiling.

Whether the swap is "fairer" depends on who you ask. Sales taxes are regressive: they take a larger share of income from lower-income households, because those households spend a higher proportion of their earnings on taxable goods.

Property taxes are unpopular, but they are at least tied to wealth. A household with a $400,000 home pays more than one with a $250,000 home. A sales tax does not make that distinction.

To put the rate in practical terms: the 0.25% tax adds 25 cents to a $100 purchase. On a $500 appliance, it is $1.25. Those amounts are small individually, but they add up across every transaction in the county.

Voters eliminated a property tax levy and replaced it with a fairer, more sustainable sales tax.

Mike Buehler, McHenry County Board Chair

For renters, the picture is mixed. They do not receive property tax bills directly, but economists generally find that property taxes are passed through in rent. Whether the sales tax shift saves renters anything is an open question.

The honest answer is that the data so far shows revenue stability. The equity question is longer-term and harder to measure.

The Mental Health Board contracts with providers for crisis intervention, substance abuse treatment, and counseling across the county.

The question for the next budget cycle: how detailed will the board's public reporting be on where the $11.2 million goes? Provider contracts, service volumes, and outcome data would help voters evaluate whether the swap is working beyond the top-line revenue number.

The sales tax has survived its first real test: matching the old levy's revenue after a stumble that should not have happened. Whether it proves "fairer" depends on questions that take longer to answer.