Mayor Brandon Johnson proposing corporate head tax again, sources say
Take two? Mayor Brandon Johnson will again propose Chicago hit big corporations with an employee head tax — with an exemption in less wealthy parts of the city — when he unveils his budget proposal Wednesday, sources said.
Johnson is also proposing the city borrow an eye-catching $480 million to pay for police-related lawsuit settlements and raise personal property lease transaction taxes from 15% to 20%, a move that would hit large businesses hardest and raise an estimated $234 million.
Altogether, the moves aim to avoid hitting Chicago residents directly with new taxes and fees. By proposing large corporations shoulder the burden of balancing the city’s budget, Johnson is aiming to make good on his long-running tax-the-rich rhetoric and skirt property tax hikes and layoffs as Chicagoans prepare to vote for the city’s next mayor in February.
“They want to see billionaires and millionaires pay their fair share,” he said at a news conference last week.
Johnson’s proposal includes no broad layoffs and no property tax increases, according to four aldermen who were briefed on the plan. The mayor is expected to further detail the proposal Wednesday. Johnson’s administration did not immediately comment when asked about the proposal Tuesday morning.
Johnson’s head tax would levy a monthly $25 charge for every staffer at companies with more than 125 full-time employees. But unlike his 2026 plan that aldermen rejected, it would include a key carve-out: Companies in officially-designated socioeconomically disadvantaged areas, including large swaths of the city’s South, Southwest and West sides, would receive a rebate on the tax.
The mayor pitched the amnesty clause as a way to incentivize businesses to set up shop in the city’s economically weakest neighborhoods. His administration estimates it will generate $102 million, multiple sources confirmed.
Companies would receive a rebate equivalent to the tax for every employee whose primary workplace is in one of the designated areas. Johnson’s administration estimated around 3% of Chicago businesses would be affected by the tax.
With the move, Johnson is reviving a fight he lost last year and has mentioned to reporters virtually every chance he has had ever since.
The mayor made a head tax the marquee part of his spending plan proposal last year, but despite proposing an array of different per employee prices and company sizes, aldermen rejected both the tax and the mayor’s entire budget. Instead, the City Council dealt him a historic defeat and passed their own spending plan.
That left Johnson, who neither vetoed nor signed aldermen’s counterproposal to the 2026 budget, in a politically weakened position.
But to hear Johnson tell it lately, his strength lies in his determination to take the city’s wealthiest entities to task — as he also gears up for a reelection fight that his campaign believes rests upon those progressive laurels.
And by proposing the personal property leasing tax be hiked again, Johnson is largely targeting the sort of cloud computing technology that large companies rely on to manage data in increasingly online workplaces. Johnson’s team pitched the spike as a “tax on Big Tech” in briefings to aldermen.
Aldermen are likely to closely scrutinize Johnson’s plan to borrow $480 million to pay for police-related settlements, including the $261 million mass deal approved by aldermen last week to settle 16 lawsuits tied to disgraced former Chicago Police Department Det. Reynaldo Guevara.
Johnson had signaled in September he might not borrow to pay for the expensive police deals when he included their cost in his budget gap estimate. Similar borrowing last year rankled some in the City Council and was later cited as evidence of the city’s inability to find structural solutions to fill its budget gaps by agencies who downgraded the city’s credit rating.
Despite Johnson’s rhetoric, Chicago residents could face several new fees and taxes if the mayor’s budget is passed.
Johnson hopes to raise taxes on sportsbook betting to 20% to raise $37 million and is counting on $18 million from the expansion of the city’s Smart Streets program that automates ticketing for cars illegally parked in bike and bus lanes.
Furthermore, he wants to bump taxes on liquor purchased for off-site consumption to raise $13.8 million and create a new $.15 tax on packages to bring in $9 million.
But the vast majority of the money needed to balance the city’s budget would come from large businesses under the mayor’s plan.
Johnson has remained unrelenting in his calls for higher taxes on the rich in recent months. He has repeatedly cited federal tax cuts on corporations backed by President Donald Trump as a primary reason corporations have the cash to shoulder more.
Earlier this month, he urged the aldermen who sided against him last year, who he dubs the “corporate caucus,” to view taxes on big companies as basic debt collection.
“Those corporations benefit from city resources, from city workers and continue relocating here at record rates,” he said. “It is past time for the city of Chicago to collect what is owed, because when we ask corporations to pay their fair share, we unlock the resources needed to make the investments that strengthen our neighborhoods and improve the lives of working people.”
With the early October line, Johnson teased at the official name for his latest proposal: “the Fair Share budget,” a nod to former Mayor Harold Washington’s 1986 spending plan of the same moniker. Johnson’s allies have compared him to Chicago’s first Black mayor who too faced a council revolt, though others have been less than thrilled with that parallel.
Chicago faces a projected $882.4 million hole in the 2027 budget, mostly due to long-term pension liabilities and an avalanche of city settlements coming home to roost. Council opposition has already tried to check him on the latter expense, questioning the estimate of a whopping $401 million in settlements and judgments next year.
Chicago has received three downgrades from credit rating agencies under Johnson’s leadership, most recently a pair in February. In its latest downgrade, the firm Fitch cited budgetary decisions made by both Johnson and his opponents as “less prudent or fiscally reliable.”
What budget fixes City Hall lands on next could determine if the city sees more downgrades that make borrowing money more expensive.
Johnson committed to making the $364 million “advance” pension payment in 2027 — a continuation of a policy from Mayor Lori Lightfoot to help keep the city’s retiree funds from going underwater.
The $500 million increase in costs next year are driven by a $160 million increase in pension and bond payments, a $266 million increase in settlements and judgments, employee benefits, and fuel and energy pressures from the war in Iran and federal policies, Johnson budget officials have said. The city also assumes it will continue picking up the $175 million share of the cost of nonteacher pensions for Chicago Public Schools workers, as it expects to do the following two years.
In all, pension costs for 2027 will rise to $2.94 billion. Chicago’s long-term debt service payments — another continued drag on the overall budget — will jump from $2.16 billion to nearly $2.5 billion in 2027.
In the weeks to come, Johnson’s budget team must come up with a path to 26 votes — or 25, if he’s open to casting a tiebreaker — members of the council.
jsheridan@chicagotribune.com, ayin@chicagotribune.com and aquig@chicagotribune.com