Statement: Chicago passes record budget without head tax

CHICAGO (Dec. 20, 2025) – The Chicago City Council passed its record spending $16.6 billion 2026 budget, 30-18, today. It marks the first time in modern Chicago history a budget opposed by the mayor has originated and passed in the council.

This version of the budget rejected Mayor Brandon Johnson’s proposal to reinstate a head tax, which would have charged businesses with over 500 employees $33 per worker, per month. The idea was roundly criticized as a job killer. Chicago would have been the only major city in the country charging anywhere near the level of Johnson’s proposed head tax, according to Chicago Policy Center research.

Several elements of the “alternative” budget could still concern ratings agencies and trigger a downgrade that increases city borrowing costs. The budget:

• Lacks structural efficiencies recommended in an EY accountants’ report, including asking government employees to pay more for their generous health care benefits.
• Does not include a pay freeze or furloughs.
• Overly relies on one-time revenue sources.
• Relies on new borrowing authority to cover operating expenses.

The plan includes $535 million in tax increases, along with one-time revenue, borrowing and assumed efficiencies to close the $1.15 billion gap the city was facing. Included in the council’s budget are: a first-in-the-nation social media tax, a cloud computing tax increase, a liquor tax increase, an expansion of the congestion tax charged to rideshares, a plastic bag tax increase, and additional fines and fee collections. Despite union pushback, it also allows for vendors to add video gambling terminals and taxes those accordingly.

The budget also includes a record-setting tax increment financing fund sweep of over $1 billion. It will allow Chicago Public Schools to hike property taxes beyond the Property Tax Extension Law Limit without a vote and reimburse the city for a $175 million pension payment.

Statement from Austin Berg, executive director of the Chicago Policy Center: 

“The Chicago City Council asserted itself rather than rubber stamping a disastrous, anti-growth business tax. However, as this budget shows, city leaders are still unequipped to make the difficult decisions necessary to stabilize Chicago’s rocky finances. The budget overly relies on one-time revenue and borrowing to fund operations. And it lacks the structural cuts and efficiencies needed to avoid a credit downgrade.

“This budget is ultimately a symptom of a broken budgeting process in Chicago. We are the only major city lacking basic fiscal guardrails, such as an independently elected fiscal watchdog or voter approval of tax hikes or new debt, to ensure balanced, smart budgeting. Until city leaders adopt these reforms – ideally in a city charter that cannot be changed on a whim – Chicago residents and businesses will continue to be burdened by crushing debt and new taxes.”

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