Chicago mayor revives head tax plan in new budget
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Mayor Brandon Johnson's head tax will rise again in his 2027 budget — albeit with tweaks — in a plan he's scheduled to unveil at a Wednesday meeting.
Why it matters: The revived head tax, along with a higher cloud computing tax and $480 million in borrowing to pay off police settlements, could face stiff resistance from alders.
- They successfully blocked Johnson's budget last year and have proven increasingly wary of taking on new debt.
Context: As if budget season isn't political enough, the mayor and most of the council will hammer out the 2027 financial plan as they head into contentious February elections.
By the numbers: The $17.6 billion plan aims to close an $882 million budget gap while maintaining 36,037 full-time city jobs.
- The budget features about $120 million in cost cuts, including $85.4 million in "operational efficiencies" and $34.4 million in personnel savings from what city officials call "freezing" some unfilled positions.
What they're saying: "It's a budget that expresses equity and fairness, that works to improve the quality of life for working people," Johnson said during a Tuesday night press briefing.
- "But it also addresses…the structural damage that I inherited, and continues to address those challenges as we continue to work to stabilize our budget and grow our economy while also making critical investments in working people."
The other side: Johnson "is proposing to spend money we don't have and raise taxes instead of doing the hard work residents expect: to implement efficiencies and collect debt that's owed to us, and cut spending without cutting critical services," Ald. Scott Waguespack tells Axios.
- "Chicago is in desperate need of jobs and a tax on jobs is anti-growth. He doesn't have the votes. We are ready to work with him but the mayor needs to meet us there."
Between the lines: "Borrowing in the short term to pay off legacy liabilities has some merit and should be discussed," Civic Federation president Joe Ferguson tells Axios.
- But he adds that he's "deeply disappointed" the budget doesn't consider more "savings and efficiencies."
Drill down
The new head tax would charge companies with more than 125 employees a monthly $25 tax per staffer.
- Yes, but businesses located in certain low-income areas of the city could get a rebate on the tax.
- It's expected to generate about $113.8 million per year.
The $480 million in borrowing would cover:
- The recent $260 million settlement with 17 people who allege that former police officer Reynaldo Guevara framed them for murder.
- Another $120 million going to other settlements approved in 2026.
- The final $100 million would pay for 2027 settlements.
Other new revenue sources include:
- Increasing the personal property lease transaction (PPLT) tax, also called a cloud tax, from 15% to 20%. Exceptions would be made for vehicles and equipment for movie making.
- Raising the sports wagering tax to 20%, expected to bring in $76.9 million.
- A new "package waste" tax of 15 cents for any box or container used to deliver or carry out non-food items. It's expected to generate $9 million.
What we don't see: Increased garbage fees, a property tax hike or significant layoffs.
What we're watching: Police cuts? Johnson's team avoided specifics on the 2027 Chicago Police Department budget, saying only that sworn officer roles would be "transitioned through civilianization."
What's next: Johnson will present the full budget Wednesday morning and the two sides must finalize details by the end of the year.
- Let the negotiations begin.