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.
But the proposal is sure to face pushback from aldermen, who grumbled at City Hall about his revived head tax attempt and also questioned his large borrowing for settlements many view as an annual cost, including $120 million earmarked to pay for settlements passed in 2026.
Johnson’s proposal includes no broad layoffs and no property tax increases, according to four aldermen who were briefed on the plan. He is also proposing the city ramp up spending on neighborhood services, with ten new tree-trimming crews, expanded rodent control services, additional weed cutting workers and more, according to briefing materials obtained by the Tribune.
Johnson also plans to propose a $520 million tax increment finance surplus, enough to send $285 million to Chicago Public Schools.
More Top Picks Led Vs Fluorescent Light Which Is Worse For Headaches
The mayor is expected to further detail the proposal Wednesday. Johnson’s administration did not comment when asked about it Tuesday.
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 broader budget plan. Instead, the City Council dealt him a historic defeat and passed its 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. The tax applies to all physical and digital property leases, but vehicle leases would be exempted from the increase and equipment leased for film production would be taxed at a lowered 11% rate.
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.
Of the $480 million, $260 million would be earmarked for Guevara cases and $100 million would be used to pay for settlements approved in 2027. The remaining $120 million would pay for settlements approved in 2026, a highly unusual move that risks harm to the city’s financial reputation by spreading fairly typical operating costs from the current financial year over the next several years.
The debt would be repaid over five to seven years, Johnson’s press secretary, Allison Novelo, said Tuesday afternoon. She declined to estimate how much the move would cost in interest and said the price would be determined by future market conditions.
Despite Johnson’s “tax-the-rich” 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-cent tax on packages to bring in $9 million.
But the vast majority of new long-term revenue used 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.
Johnson is tying the new taxes and borrowing to new spending to improve neighborhood services. During briefings, his team said its plan would allow for 10,000 additional tree trims every year, more garbage cart replacements and a jump in the number of rodent control teams from five to 28. The mayor also plans to use revenue from a tax on social media companies that itself is facing legal challenges to expand his signature mental health crisis response program, while adding $30.9 million in spending for libraries, $24 million for more youth summer jobs and $7 million for childcare worker raises.
The mayor also said he plans to maintain a full $363 million advance payment to help bolster the city’s famously feeble pension funds — a continuation of a policy from Mayor Lori Lightfoot to help keep the city’s retiree funds from going underwater.
His administration previously 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, but his team this week told aldermen the gap is now $652.5 million. Council opposition has already tried to check him on the original number, 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.
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 non-teacher pensions for Chicago Public Schools workers, as it expects to do in the following two years.
More Top Picks Ice Maker
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.