Chicago Head Tax: So Many More Reactions
Gotta Get Them In While the Proposal is Still Alive
This may be shorter-lived than the Cook County Soda Tax, so I need to harvest reactions as rapidly as possible.
WSJ: We all know this is dumb, right?
31 Oct 2025, WSJ Editorial Board: Chicago’s Head Case Wants a Head Tax
There are bad ideas, really bad ideas, and then there is whatever Chicago Mayor Brandon Johnson is proposing next. His latest desire is a head tax on job creation in the city.
America’s worst mayor is proposing a $21 a month tax on each employee of businesses that have more than a hundred employees. Chicago is facing a $1 billion budget shortfall for 2026, and the mayor’s office projects the tax would bring in about $100 million in new revenue. The mayor seems not to have heard of the truism that if you tax something you get less of it.
Mr. Johnson’s Budget Director Annette Guzman told the Chicago Tribune that the tax would apply only to employees who spend three days a week in the office. But many offices are still recovering from the work-at-home Covid years. The mayor apparently wants to give companies incentive to keep employees working at home.
That’s bad news for Chicago restaurants trying to win back regular lunch crowds. It also penalizes companies whose business is more blue-collar or in services. Workers who need to be in person each day (say, in healthcare or manufacturing) don’t have the luxury of evading the head tax by working from home.
Given that pretty much all companies figured out how to manage a remote workforce in 2020, except for work that absolutely has to be done in-person, why the hell would you do a per-person tax based on location?
This is incredibly stupid.
The Governor of Florida, you know, the beneficiary of Ken Griffin and Citadel being run out of Chicago and Illinois by its tax environment, had some commentary:
City Council Not Exactly on Board
So, I’m not getting into the whole process of who has to pass what (yet).
But this does not bode well:
30 Oct 2025, NBC5 Chicago: Half of Chicago City Council is ‘gravely concerned’ about head tax proposal
A majority of Chicago City Council members sent a letter to Mayor Brandon Johnson detailing their three biggest concerns with his 2026 budget proposal.
In a letter Wednesday signed by 27 alderpeople, they wrote that they are “gravely concerned” about reinstating the corporate head tax, which would charge large companies $21 per employee per month. They argued the tax would discourage hiring and push employers outside the city.
“We ask your administration to model alternative budget scenarios that exclude this jobs tax,” they wrote.
Chicago previously had a corporate head tax in place, until in 2014, then-Mayor Rahm Emanuel -- calling it a “job killer” -- eliminated it as part of a campaign pledge.
A spokesperson for the mayor’s office told NBC Chicago two alders have since requested their names be removed from the letter, but would not say which alders. That still means 25 of the 50 alderpeople are not on board with the mayor’s plan.
They mention this E&Y report, which I attach below.
There is some interesting stuff in there, but I’m not going to bother with it right now. It looks like Mayor Johnson didn’t.
I’m partly not dealing with it right now because some of these aldermen have invited the E&Y folks to discuss the recommendations: [via Austin Berg]
I can wait til after the said meeting.
The Head Tax Won’t Work
I have no problem running multiple pieces of people making the same point.
30 Oct 2025, A City That Works, Conor Durkin: A Chicago Corporate Head Tax is a Bad Idea
From 1973 to 2014, Chicago imposed a head tax of $4 per employee per month on businesses with at least 50 employees in Chicago. In 2014, under Mayor Emanuel the city repealed this tax in what was widely viewed as a pro-business decision. Johnson’s new proposal is for a much higher head tax - $21 per month per employee, imposed on all companies with at least 100 employees working in Chicago. The budget estimates this would bring in $100 million in revenue next year.
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The regressive impact on jobs
Start with a fundamental issue with head taxes: unlike a payroll tax or corporate income tax, they charge the same amount for each worker, regardless of how much that worker earns or how profitable a business is. And this would impact quite a lot of workers. While the mayor’s office has repeatedly referenced the tax impacting only 3% of employers, the math suggests it would impact roughly 1 in 3 employees in the city.1
A company pays $250 annually whether they’re employing a retail worker making $35,000 per year or a software engineer making $150,000. For the retail worker, that’s 0.7% of their total compensation. For the engineer, it’s 0.17%. That’s a 4-5x difference in proportional burden. You might still view the $250 as a small amount in either instance, and I’m sure that some businesses would just pay it. But decisions get made on the margin, and some businesses will certainly look at the extra cost and decide not to hire that extra worker. In those instances, that unhired employee is disproportionately likely to be a working class job. In addition to the actual tax, it’s also worth considering the overhead cost that dealing with the tax imposes on employers, who now need to spend more time on accounting and bookkeeping about exactly how many days each of their employees worked in the city.
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Workforce mobility matters, too
There is one key difference between the labor market and the housing market in my comparison above - houses don’t move.2 Workers do. I was struck by a comment from city budget director Annette Guzman that their analysis of who would end up paying this tax was largely extrapolated from city data regarding companies paying the tax prior to its repeal in 2014. While I take her point that many of those companies still exist and employ many workers in Chicago, that seems incredibly naive compared to the post-pandemic reality of remote or hybrid work. I imagine many of those employers she’s referring to no longer require employees to be in the office five days a week.
To be sure, other things were going on in those periods, and 2008 is an important split year for a reason. Finance/insurance is a big sector for Chicago. So post-financial-crisis of 2008, there was some recovery… but that’s after already there had been a rocky time 2000-2008.
There could have been other factors boosting Chicago’s growth post-2014 other than removing the head tax, of course. There were a bunch of things moving around. But comparing against the surrounding full county, the full MSA, the full state, and the entire nation gives some good contrasts.
Austin Berg: They Really Didn’t Think This Through
This reminded me a little of the Cook County Soda Tax.
2 Nov 2025, The Last Ward, Austin Berg: Is Brandon Johnson’s head tax already dead?
But all of Johnson’s big new revenue proposals to date have something in common: None have passed. And his much-maligned $21-per-employee monthly head tax appears doomed to the same fate.
After we scooped the details of Johnson’s head tax, there has been a torrent of new opposition—and no new, prominent support—for this proposal.
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Chicago’s tax would be five times higher than Denver’s, which currently stands as the highest head tax in the country. And while Johnson’s team has been pushing the Denver example with City Council members, they’re ignoring a key difference in Denver’s head tax: it hits employees directly.
Denver charges a $4 per-employee-per-month head tax on businesses, compared to Johnson’s proposed $21, but it also hits every employee of that business with a $5.75-per-month tax that’s withheld directly from their paychecks.
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Then, Johnson appeared to be caught off-guard by a simple question from Crain’s Chicago Business reporter Justin Laurence: Did the mayor’s team account for employees working remotely, who would not be subject to the head tax, when they calculated their $100 million revenue estimate?
Johnson couldn’t answer and deferred to Budget Director Annette Guzman. Her answer made clear that his team had not, in fact, considered remote work in creating the revenue estimate.
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There have been rumors that progressive City Council members are discussing the introduction of an even higher head tax proposal: $40 per employee per month, or more.
Ha, almost doubling the tax would definitely kill it. It’s already unpopular.
Austin Berg discusses the E&Y report and recommendations, so go to his post to look at the amounts discussed.
More Reactions
Paul Vallas’s complete post:
The Tribune cartoon captures the impact of the Mayor’s proposed Head Tax.
Johnson’s tax proposals are not “taxing the rich” as he claims. His Head Tax on businesses is for their number of employees. His “Cloud Tax” increase is on computer use and services.
Each bear no relationship to one’s income or ability to pay and are regressive job killers.
The new Head Tax and what will be the nations highest Cloud Tax adds to Chicago’s already highest commercial property and sales taxes to further drive businesses from Chicago.
Chicago has 17% fewer businesses than 10 years ago while the Magnificent Mile has half the businesses. Johnson’s sub minimum wage has already cost the city over 5,000 jobs since last June.
The Tribune editorial points to businesses avoiding the Head Tax by having more employees work from home, further hurting downtown businesses like restaurants and retailers dependent on foot traffic. This will result in the tax generating far less revenue than anticipated.
The Mayor can avoid imposing the Head Tax and raising the Cloud Tax by making schools pay their own expenses the city currently subsidizes from the record $552M in TIF property tax windfall the city’s providing them this year.
29 Oct 2025, Chicago Tribune editorial (at Yahoo): Editorial: Here’s yet another problem with Mayor Brandon Johnson’s head tax
There are many reasons that Mayor Brandon Johnson’s proposal to impose a new $21-per-job monthly tax on major private-sector employers in Chicago is a terrible idea, and we’ve discussed a number of them already.
But there’s yet another negative consequence to highlight, one that strikes right at the heart of one of the mayor’s economic priorities — reinvigorating the Loop. We met Tuesday with the mayor and his finance team to discuss his 2026 budget.
As part of a generous, wide-ranging discussion, which we appreciated, they confirmed what we’d heard: Affected companies can reduce the cost of the proposed head tax if their employees work from home more often than they’re in the office.
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In other words, the levy would be a government-instituted disincentive to bringing more office workers back to the Loop for the majority of the workweek. That would harm restaurants and retailers who depend on downtown workers for much of their revenue. And it could well set back the fitful improvement in central business district activity that we’ve seen over the past 12 months or so.
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We haven’t even mentioned the logistical headache of tracking which employees are in the office more than 50% of the time and which aren’t. How will that work? Will the companies self-report who qualifies and who doesn’t, and how many resources will the city devote to verifying the information?
The revival of the head tax is a bad idea for all the reasons we’ve stated before. Stated simply, our visitors said they want to encourage private-sector job growth, and this proposal discourages it. Simple as that.
But even if we agreed with the concept, this tax seems extremely difficult to manage in a work-from-home era that Richard J. Daley would have found bizarre.
Yes, put in a tax that’s intended to be simple that will actually be more complicated. That’s brilliant.
Difficult to find supporters of the head tax
I tried to find people other than Bryan Johnson trying to support this dumbass tax, but pretty much all of them “Those rich companies need to pay their fair share!” and it didn’t get any deeper than that.
I found this old post from the CTU in December 2024: Chicago is NOT broke: millions on the table if wealthy pay their fair share
Progressive big business and high earners tax
Chicago could revisit a corporate head tax and make it way more progressive by targeting only big businesses with high-earners on their payroll. Chicago previously imposed what was called a “head tax” on employers with more than 50 employees. It brought in $35 million in revenue until it was repealed in 2014. While the right wing, the Commercial Club of Chicago and its cheerleaders in the corporate media have smeared any talks of reviving the tax, calling it a job killer, they refuse to acknowledge the success of similar progressive taxes in other cities.
In the most noteworthy example, Seattle brought back its own version of a corporate head tax — which was repealed in 2018 after a corporate funded campaign — by targeting payroll of big businesses, making it far more progressive, and tying it to affordable housing and environmental justice initiatives. The city’s tax, called the JumpStart Seattle initiative, charges businesses with earnings more than $8.5 million and only on payroll of employees earning over $150,000. The tax has been so successful it has blown past estimates since its passage in 2020, bringing in over $400 million in revenue this year. Chicago could do the same.
Except there had been some new developments since that Dec 2024 post, as I mentioned here:
Short version:
Seattle has found this tax to be a very volatile revenue source, and yes, there was a spike of revenue in a few taxing periods
Those spikes led them to “divert” that revenue to fill budget deficits, for purposes outside the JumpStart Seattle initiative, which it was supposed to be used for
Oh, and by the way, recently that revenue fell way short of targets… so the deficit has not been filled, forget about the JumpStart program not being funded
I understand that the CTU & crew would rather not look at E&Y-type solutions, which involve reducing headcount and increasing revenue from employee contributions to their own benefit costs, among other obvious cost-cutting measures, but they really don’t want to hear their preferred revenue-raising strategies won’t work, either.
Is the current 2025-2026 Budget in a deficit or is this for 2026? What happens when the Chicago / State of Illinois (democrat) politicians don't get sufficient revenues? Wonder when the system collapses? The State of Ill can't declare bankruptcy and it is politically difficult for the City of Chicago and the City & State pensions to do so. What are the scenarios and when?