First We Get the Money

Last week a pair of organizations with ties to newly-inaugurated Chicago Mayor Brandon Johnson (yes, I know, the T-shirts are already being offered for sale) issued a proposal for increasing taxes and decreasing expenses. The Johnson Administration was quick to distance itself from the proposal. A little. Despite all of the proposals having been things that Mayor Johnson ran on. Inspiringly, the proposal had the title of this post as its title.

The editors of Crain’s Chicago Business have some recommendations for Mayor Johnson:

The proposal, authored by two grassroots organizations with ties to Johnson — Action Center on Race & The Economy and the People’s Unity Platform — calls for measures such as a city wealth tax, an income tax, deep cuts in police spending and an end to all tax-increment financing projects. While these ideas may sound good to many of the Chicagoans who voted Johnson into office, it’s important to read the fine print and understand just how many middle-class Chicagoans — not just fat cats — would be hurt if many of these notions became policy.

As Crain’s Greg Hinz first reported, a few of the proposals these groups are espousing match up with concepts Johnson himself campaigned on, most notably:

• Reinstating the “head tax” of $33 per worker on companies with at least 50 workers, netting $106 million a year.

• Boosting from 5 cents to 14 cents the tax per gallon on jet fuel used at Chicago’s airports, raising $96 million.

• Raising the real estate transaction fee on sales of at least $1 million by 1.9 percentage points, a move the group estimates would generate $163 million.

Beyond that, the progressive advocates also propose:

• Imposing a city income tax of 3.5% on any household with income above $100,000 a year. This tax would apply to Chicago residents as well as money made by suburbanites employed in the city. Here in Chicago, at least a third of city residents would end up paying at least some city income tax under this plan;

• Creating a 0.4% annual wealth tax on the richest 10% of Chicagoans.

• Levying a tax on luxury-apartment vacancies that’s designed to pressure landlords into lowering rents to more affordable levels.

• Taxing financial transactions at Chicago’s financial exchanges.

On the spending side of the ledger, the plan calls for eliminating all vacant positions in the Chicago Police Department, and then cutting the police budget another 9% a year. All new TIF spending would be eliminated, with efforts to renegotiate or file lawsuits against existing TIF deals, such as the one extended to the Lincoln Yards development. And a new city bank would issue debt at lower than private-market costs, a move the proposal’s authors contend would save the city money.

Undergirding all of these ideas are two faulty premises: one, that Chicagoans aren’t taxed enough, and two, that we have plenty of police to keep the city safe. Johnson would be correct to add even more space between himself and both of these notions.

CME Group chief Terry Duffy has already threatened — on the day of Johnson’s inauguration — to move the exchange out of town if the tax situation becomes too burdensome. Major employers such as Caterpillar, Boeing, Citadel have already headed out of the city, with Guggenheim Partners apparently poised to follow on their heels.

It’s unlikely this report’s authors or the people who are aligned with them concern themselves overmuch about these departures. These are big, bad corporations, after all. But perhaps the report’s authors should consider how these taxing ideas will affect constituencies they care more about: Chicago workers and families.

As Crain’s Jack Grieve reported on May 1, Chicago residents need to earn an annual income of $172,600 for their purchasing power to equal that of the average American taking home $100,000. And in order to sustain households bringing in even that much of a salary, the city needs a base of employers able to create and support decent-paying jobs. Head taxes undercut job growth. And wealth taxes seem likely to hit middle-class families saving for goals like college and retirement.

When pressed for insight on the mayor’s own attitude toward these proposals, a senior adviser told Crain’s, “if we were for these ideas, we would have said it.” And yet, given many opportunities to express opposition to these measures, the adviser said only: “Everybody should have a right to put their ideas into the public square.”

That’s not exactly comforting. Nor is the pushback from some observers who have been quick to argue these are merely fringe ideas that would be dead on arrival in Springfield, where many of these measures would have to be blessed before they could be implemented. Messaging matters — especially at a time like this, when investor and employer faith in Chicago as a great place to do business is faltering. If the mayor truly isn’t considering things like a city income tax, a wealth tax, a financial transactions tax or any of the other ideas contained in this report, he ought to say so, loudly and unequivocally.

I wanted to make a few observations. First, Chicagoans are among the most highly taxed people in the country. Sales taxes, property taxes, excise taxes, and fees are all high. Chicago’s problem is not that taxes are too low but that we don’t get value for what is received in city services. That more than 20% of Chicago’s budget is devoted to public employee pensions, making up for years of non-contribution, doesn’t help.

Second, the fuel tax would require an act of Congress and the city earnings tax, head tax, and wealth tax would require action by the state legislature. To paraphase German foreign minister Joschka Fischer, they could do it. The question is whether they could keep their jobs if they did it.

Third, taken together those taxes make the city even more dependent on those earning the highest incomes while providing them with very little incentive to stay.

3 comments… add one
  • Grey Shambler Link

    Maybe a more sustainable revenue stream would be lawsuits:

  • TastyBits Link

    From the quoted passage:

    … the plan calls for eliminating all vacant positions in the Chicago Police Department, and then cutting the police budget another 9% a year. …

    As any backwoods West Virginia ER Doctor can tell you, this is bullshit. No progressive wants to cut police departments.

  • Drew Link

    There you go again, Tasty, calling out absurdities.

    You are in for a wild ride, Dave.

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