Suburban businesses should beware new taxes disguised as ‘solutions’

Suburban business owners long have depended on and contributed to Chicago’s economy.

Many drive or ride the train into the city each day, keeping Illinois’ largest economic engine running. But as state and city leaders look to plug their latest budget holes, Springfield and Chicago City Hall are floating new ways to tax the very people who fuel that engine.

Three major proposals could shape the economic landscape before the year ends: a tax-laden fix for the transit deficit, a proposed business head tax and new levies on the tech sector.

Together they threaten to drive costs higher for suburban residents and small businesses already coping with inflation and sluggish growth. Here’s what you need to know.

The transit deficit: burdening suburban commuters

The Regional Transportation Authority, which oversees Chicago Transit Authority, Metra and Pace, is staring at an almost $900 million shortfall by 2028 as federal COVID-19 aid disappears and ridership remains well below pre-pandemic levels. Instead of restructuring operations or consolidating overlapping agencies, lawmakers are raising fares and considering new statewide taxes — including fees on DoorDash and delivery orders, higher tolls and real estate transfer taxes.

Public transportation is vital for the region’s workforce, but fiscal discipline must come before new tax revenue. Labor costs make up more than two-thirds of CTA spending, and nearly half of its employees work in administration rather than operations. Suburban families shouldn’t be asked to fund bureaucratic inefficiency through higher taxes on everyday activities.

If lawmakers want transit to thrive, they should focus on safety, reliability and efficiency, including increasing police presence on public transit, consolidating duplicate roles across agencies, cutting wasteful spending and enforcing on-time and on-budget capital projects, and aligning service with demand. They also could encourage denser housing development and upzoning near transit to grow riders.

The ‘head tax’ that could cripple job growth

Chicago Mayor Brandon Johnson’s 2026 budget revives an old idea: a per-employee “head tax” on large businesses, expected to raise tens of millions of dollars. Under his plan, companies with more than 100 employees would pay $21 per worker per month — up from $2 per employee before Mayor Rahm Emanuel cut it. City officials frame it as targeting “wealthy corporations,” but in practice it would punish all employers who create jobs in the city.

Every new cost on Chicago employers ripples outward to the suburbs: fewer contracts for suppliers, slower hiring, job losses and even the relocation of corporate headquarters.

Chicago already has the highest commercial property tax rates in the nation. After a decade that lost nearly one in five Chicago businesses, policymakers should be courting investment, not chasing it away.

Instead of taxing jobs, leaders should focus on bringing government spending more in line with the city’s economic growth.

The tech tax threat

Johnson’s budget plan also targets technology, proposing hikes to Chicago’s “cloud tax” and a new 50-cent-per-user “social media amusement tax.” The so-called cloud tax applies to digital platforms used by nearly every modern business, such as payroll systems, data storage and AI tools.

These added fines and fees could deter investment in an industry Illinois needs to grow. Data center production is booming in neighboring states, and digital services increasingly are central to manufacturing, logistics and health care. Chicago should be courting cloud providers, tech-companies and social media firms to expand here, not pushing them toward Indiana or Wisconsin.

Each of these measures stem from the same problem: government overspending and reluctance to reform. Instead of tightening budgets, leaders reach for new ways to extract revenue from residents who already are paying some of the highest combined taxes in the nation.

Chicago needs tools to help it grow faster and bring more investment and opportunity, so both city and suburban businesses can grow — together.

• Matt Paprocki is the president and CEO of the Illinois Policy Institute.