Taxing Tuesday: Chicago Head Tax Redux
A Revisit to the Scrambling for Revenue in Chicago... plus some other issues
I’ve not been able to record my own podcasts for a bit due to being busy, but I was on somebody else’s podcast:
Notes:
In this episode of the Prairie State Wire podcast, host Bryan Hyde talks with actuary and writer Mary Pat Campbell, who specializes in public finance and pensions.
Campbell breaks down Chicago Mayor Brandon Johnson’s proposal to reinstate a per-employee “head tax,” explaining how similar policies have failed in other cities like Seattle and why they discourage business growth. She discusses Chicago’s ongoing fiscal challenges, including underfunded pensions, budget shortfalls, and strained relations between city and state leaders.
Campbell warns that tax-heavy policies drive away employers and revenue, while political leaders continue to ignore long-term pension liabilities. She also highlights the broader lessons Chicago offers on government mismanagement and the limits of taxation as a fix for structural financial problems
As you can probably tell, this was recorded some months back, so let’s get in our time machine and look at my posts from back then.
Chicago Head Tax Posts
First post, 17 Oct 2025:
Next post, 28 Oct 2025:
I found the history of the prior Chicago head tax, with the help of Gemini:
Mind you, a few tens of millions of dollars is a drop in the bucket compared to the billions in Chicago’s budget.
The new head tax was proposed to be larger, and they were projecting $100 million … but for a program that really, Chicago needs to think about what they can afford right now.
I had two more posts on the head tax in 2025 (these next two were after the podcast was recorded, btw)
3 Nov 2025:
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.
My opinion is rather clear.
But the other place where there was a substantial enough head tax to make some budgetary difference, Seattle, here is the 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
Last Head Tax post for 2025, on Dec 12:
The mayor wanted to hang onto his head tax idea, along with some other stuff in his budget.
I decided to make a comparison of what Johnson was having a hissy fit over and the Chicago budget (using my buddy, Gemini):
For what it’s worth, Johnson did not get the head tax. The aldermen of Chicago overrode him on that and some other line items in the budget and stared him down on it…. and he said, fine…..
….but…..
Chicago in 2026
I returned to the issue at the beginning of January:
That was Axios’s own comparison, not mine (nor Gemini’s… well, maybe they used Gemini.)
In the post, I talk about failure-to-be Mamdani (and I will get to that in future posts). But Mayor Johnson of Chicago has had plenty of time to fail on his own.
While Johnson and his allies kept trying to sell [the head tax] as a “soak the rich” strategy, it doesn’t work this way… and I don’t need to revamp those arguments at all.
Because the whole point was a way to raise revenue that didn’t require him to go begging to Springfield. Johnson hates talking with Pritzker or any other Democrats in Springfield. It’s obvious.
Or, perhaps, none of them will take his calls, and he’s gotten the signal.
The hate may be mutual. Fair enough.
It also turns out that the Chicago aldermen had enough of Johnson’s crap, and they passed their own budget, which Johnson decided not to veto.
In 2026, Johnson has been talking about having to lay off Chicago city employees and do other cuts, which I assume he thinks will be unpopular.
7 Jan 2026, ABC7: Chicago mayor warns layoffs could come mid-year after alternative budget passed; aldermen push back
CHICAGO (WLS) -- Chicago Mayor Brandon Johnson on Wednesday warned that layoffs could be coming later this year due to the budget that was passed without his support.
But some City Council members, who led the charge to pass the alternative budget, are pushing back.
Johnson is still simmering over the budget that gave him 98.4 percent of what he wanted, but did not include the corporate head tax that he fought so hard to get.
“But there are still some concerns about whether or not the budget projections that were put forward by those other alders, that those projections will actually materialize. So, now I am bracing for what could be mid-year layoffs,” Johnson said.
The mayor raised particular concerns about the revenue projections for video gaming, saying he’s concerned it will fall short. It will be monitored month by month.
“You know, as far as individuals who could be laid off being we’re talking about you know, public employees, right? It could be, you know, you know, real serious consequences to workers who are attached to community safety,” Johnson said.
Notice how mayors like this always start with cutting cops and firefighters, before they cut any of their buddies’ positions… (it’s good to be the mayor)
But more to the point, it doesn’t help that police and fire pensions were boosted last year. Yeah, maybe those positions are going to be cut because the pensions are grossly underfunded, and they can’t really afford to pay for that many safety officers as they can’t pay for those for whom they promised pensions decades ago.
Whupsie.
Speaking of pension payments…
Splitting up pension contributions: timing is everything
What’s this? A memo!
Informational Memo from the CFO of Chicago, dated 26 Jan 2026
I. Temporary Cash-Flow Advances to Pension Funds Related to Property Tax Delays
The City makes pension contributions throughout the year as required under State statute and based on actuarial determinations. These statutory contributions ensure that the pension funds have sufficient resources to pay benefits as they come due. In late 2025 and early 2026, Cook County’s delay in distributing 2024 property tax revenues created temporary cash-flow constraints for the City and the pension funds.
Breaking in - I linked it up above, but here it is again:
Back to the memo from the CFO:
To prevent the pension funds from having to liquidate investment assets to meet near-term benefit payments in late 2025, the City temporarily advanced cash to the pension funds ahead of receiving the property tax revenues to support such statutory payments, with the expectation that these cash-flow advances would be reimbursed once delayed property tax revenues are received from Cook County. This is consistent with prior practice by the City when cash-flow advances were made to the four pension funds during fiscal years 2022 and 2023 when property tax revenue distributions were also delayed.
The following details the advances made to the pension funds in 2025 and the reimbursements received.
The City has recouped approximately half of these cash-flow advances and is still awaiting about $194 million in property tax–supported reimbursements from Cook County for last year’s payments.
Which is all to say that yeaaaah, we’re going to be waiting on these for a bit. Notice the relatively high amount they’re waiting back for the police pension fund (PABF) - evidently, this is a persistent problem for that fund.
And we haven’t even gotten to the game of chicken that is the “Hey, CPS, pretty please give us our money back” with the pension contributions.
At least the Chicago Teachers Union learned not to let their pension funds erode as much as the other Chicago city pension funds.
Oh, right, the head tax
Getting back to the head tax: I’m not necessarily expecting it to return in the next budget round.
It inspired Chicago aldermen to work together to get a budget and not even involve the mayor. How many mayors want that sort of behavior?!
The main reason Johnson had dredged it up was that it was one of the few taxes that could be enacted in Chicago without needing to go through state legislative approval.
As I mentioned in the podcast, Brandon Johnson doesn’t seem to be talking with anybody in Springfield (and vice versa), so anything that can get more revenue for Chicago without involving any state-level politicians would make him happy.