Chicago aldermen propose $33 per employee ‘head tax’ on city employers

Chicago aldermen propose $33 per employee ‘head tax’ on city employers

At a time when businesses are fleeing the state, a group of Chicago aldermen are attempting to revive the employer’s expense tax to bail out Chicago Public Schools.

Chicago aldermen introduced a proposal April 19 to charge employers $33 for each employee on staff to drum up revenue for the Chicago Public Schools, or CPS, budget shortfall.

Eighteen aldermen signed on to legislation that would introduce the “head tax” to Chicago employers with 50 or more employees. However, employees who reside in one of approximately 30 neighborhoods would not be subject to the tax. These neighborhoods were chosen based on being in the top 20 in violent crime or the top 20 in hardship index.

Rahm killed Chicago’s ‘head tax’ in 2014

Chicago had a head tax from 1973-2012 until Mayor Rahm Emanuel phased out – and ultimately ended – this job-killing tax. The employer’s expense tax was a $4 per employee tax levied on employers of more than 50 full-time workers in the city of Chicago. Mayor Emanuel made it a centerpiece of his election in 2011 to eliminate the head tax entirely. By 2012, the tax was reduced to $2 per employee, and the tax was completely repealed by 2014. The tax applied to companies with 50 or more employees.

“The head tax is a job killer,” Emanuel said in 2011. “Eliminating the head tax is the right thing to do for businesses big and small and it’s the right thing to do to secure Chicago’s future. With this step, Chicago has become an even better place to start a business and we’ve enabled those businesses to create more jobs for Chicagoans.”

In July 2016, aldermen introduced a new version of the head tax that mirrored much of the tax repealed in 2014 with the fee instead being $16 per employee per month. This proposal has failed to be discharged from committee.

Yet, aldermen led by Ald. Carlos Ramirez-Rosa, 35th Ward, want to undo those reforms in order to pour more money into the failing CPS system. CPS is facing a nearly $130 million shortfall, down from $500 million after administrative cuts. Additionally, CPS must pay $720 million toward teacher pensions by the end of June.

“It is an embarrassment that there is not enough money to keep the lights on,” Ramirez-Rosa told DNAinfo.

However, rather than enacting reforms to bring CPS’ financial house in order, aldermen seek to extract more money from an already overburdened tax base. Chicago has been enacting a variety of new taxes over the past two years to add to that burden. Requirements on businesses to provide mandatory paid sick leave and to increase the minimum wage to $13 an hour in addition to the bevy of taxes adds up to an unfriendly business environment. As Chicago officials continue to increase taxes on residents and businesses, they are effectively testing to see which straw will break the proverbial camel’s back.

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