Chicago officials are considering bringing back a corporate head tax and introducing a new payroll expense tax as part of efforts to address a projected $1 billion budget deficit in 2026. The proposals, which would affect large employers, have raised concerns among business groups.
Mayor Brandon Johnson’s administration is looking at reviving the corporate head tax, a fee on businesses for each employee hired. The previous version of this tax was repealed in 2011 by former Mayor Rahm Emanuel after it was seen as discouraging business recruitment and retention.
Another proposal under review would introduce a 5% payroll tax on corporations with global payrolls over $8 million, specifically for compensation tied to employees earning more than $200,000. This measure is modeled after Seattle’s approach.
Jack Lavin, President and CEO of the Chicagoland Chamber of Commerce, voiced strong opposition to these measures. “The best long-term strategy to address budget deficits is growth,” Lavin said. “We need pro-growth strategies. These two taxes are direct deterrents on companies locating here, staying here, creating jobs here.”
Lavin also stated that “the head tax and these other taxes are all disincentives for businesses to locate here or to expand here.” He added: “our businesses, which are creating jobs, they’re struggling with high property taxes, costly regulations and inflation. So right now the work should be to find cuts, to find efficiencies, to find shared sacrifice, not to immediately turn to raising revenue.”
Business leaders argue that options for structural reform have not been fully explored before proposing new taxes. “There must be efficiencies and shared sacrifice in there before we ask the taxpayers of Chicago and businesses in Chicago to pay more revenue,” Lavin said.
The Chamber has expressed willingness to collaborate with City Hall and stakeholders on solutions aimed at fiscal sustainability without compromising employment or investment in the city. The organization continues to advocate for cost-saving measures and careful management of public funds rather than increasing financial burdens on employers.