Politics
Third Time a Charm? Mayor Johnson Proposes New Corporate Tax Hike to Break Budget Deadlock
Hoping the third time will be the charm, Mayor Brandon Johnson on Tuesday offered to reduce his proposed corporate tax hike to spare companies with fewer than 500 employees in an effort to break the stalemate surrounding Chicago’s 2026 spending plan.
Much of the debate over Johnson’s 2026 budget, which would impose $623 million in new taxes on the wealthiest Chicagoans and largest firms, has centered on his call to reimpose the so-called head tax to generate $100 million to fund violence prevention and youth employment programs.
The current proposal would impose a $33 per employee tax on companies with 500 or more employees to generate $82 million to fund violence prevention and youth employment programs.
While Johnson and his allies have defended the head tax as the best way to continue funding the programs they credit with reducing Chicago’s homicide rate by approximately 29% and the city’s overall violent crime rate by more than 22%, opponents contend the tax will kill jobs and stifle economic growth.
It is unclear whether a majority of the City Council would support a so-called head tax at any level.
Three of the mayor’s leading critics quickly blasted the revised proposal, reducing the chances for an immediate breakthrough.
Ald. Nicole Lee (11th Ward) said the head tax would prompt employers to scale back their hiring plans, hurting the city’s economy, and Ald. Felix Cardona (31st Ward) said that slowdown would hurt Black and Latino Chicagoans hardest, while Ald. Matt O'Shea (19th Ward) called the proposal nothing more than a “clever marketing tool.”
“This sends the wrong message at the wrong time that Chicago is not open for business,” O’Shea said.
Twenty-six members of the Chicago City Council have signed on to a plan to bridge Chicago’s $1.19 billion budget gap without hiking taxes on large firms.
Johnson has promised to veto a budget that includes a reimposed grocery tax, hikes garbage fees or property taxes. In addition, Johnson has vowed to reject any spending plan that cuts the Chicago Police Department’s proposed $2.1 billion budget.
It would take 34 alderpeople to override that veto.
Originally, the so-called head tax would have applied to businesses with more than 100 employees to generate $100 million. Before Thanksgiving, Johnson revised the plan to apply to firms with at least 200 employees.
But in short order, the proposal was revised, again, to apply to all firms with 100 employees to once again generate $100 million. The violence prevention and youth employment programs would get $82 million, with the remaining $18 million funding grants for small or mid-size businesses that would struggle to pay the new tax.
The revised head tax on companies with 500 or more employees would now apply to just 175 firms, including Walmart, J.P. Morgan Chase and Accenture, and cost them a fraction of the federal tax breaks signed into law by President Donald Trump, Johnson said during a news conference at City Hall.
A $4 per month, per employee head tax on businesses with more than 50 employees, which was in place for four decades, was eliminated in 2011 by former Mayor Rahm Emanuel, who said lifting it helped spur millions of dollars of economic activity in the city and prompted dozens of companies to relocate to Chicago.
But Johnson said the repeal of the head tax did not spur the creation of more jobs in Chicago as compared with other cities, and “cost taxpayers $240 million that was made up for in property taxes, regressive fines and cuts.”
With just 21 days left before the deadline to avoid an unprecedented shutdown of city government, both sides have accused the other side of failing to work collaboratively to find a solution.
Officials cannot pass a short-term ordinance to keep City Hall functioning while negotiations continue, officials said. That means without a budget agreement, more than 30,000 workers will not be paid and city services will stop.
Contact Heather Cherone: @HeatherCherone | (773) 569-1863 | [email protected]
