Facing fierce opposition from the business community, Mayor Brandon Johnson’s senior adviser Friday began the defense of a proposed $16.6 billion budget that begins to shift Chicago’s tax structure to match the digital economy.
Jason Lee said there is room to negotiate the precise levels of a revived employee head tax, an increased tax on cloud computing software, a tax on social media companies and a higher tax for online sports betting. Together, those taxes are being counted on to generate nearly $500 million in annual revenue.
But Lee told the Sun-Times he expects the basic parameters of Johnson’s proposed 2026 budget to survive what could be another marathon debate in the City Council, because they make sense to confront what he called the “existential challenge” posed by an economy that is “shifting to the digital world.”
“We have a tax regime that was built on collecting revenues from the real world — from companies that hire a lot of people. Those people buy goods. We [levy] sales taxes, property taxes,” Lee said. “We’re moving to a digital economy where it’s very difficult to figure out how to capture revenue as more and more resources shift to that economy.
“To provide the public services that everyone relies upon, we have to figure out how to leverage ourselves to the areas of the economy that are growing exponentially, creating historic levels of wealth,” Lee added.
Johnson campaigned on a promise to impose $800 million in new and higher taxes on businesses and wealthy Chicagoans to help bankroll $1 billion in “investments on people.”
But until now, he has made no progress on that front. His signature plan to raise the transfer tax on high-end real estate transactions was rejected by voters after a multi-million dollar lobbying campaign by the city’s real estate and business interests.
Lee said he expects another multimillion dollar lobbying campaign to be mounted this time by business leaders determined to block the double-whammy of a $21-a-month-per-employee head tax and a 14% tax on cloud computing software — the latter which Chicagoland Chamber of Commerce President Jack Lavin called a “job-crushing sibling to the head tax.”
Meantime, powerful building trade unions are concerned Johnson’s decision to declare a $1 billion tax increment financing surplus would deprive the city of money it needs to build neighborhood projects.
With $920,122 in his campaign war chest just over a year before the mayoral election, Johnson doesn’t have enough money to counter any kind of strong lobbying push from the city’s business and labor communities.
But Johnson’s rise from single-digit obscurity to the mayor’s office after being outspent 2 to1 is proof money is “not the only force” in politics.
“There are people all over this city — coalitions of activists and organizers and labor and faith — who’ve been working on these ideas for years. This budget is the culmination of that work. They are also going to help make sure that the conditions exist for most of the ideas in this budget to move forward, because we need them today and we need them tomorrow,” Lee said.
Johnson’s two most powerful allies — Finance Chair Pat Dowell (3rd) and Budget Chair Jason Ervin (28th) — are determined to bring back the automatic escalator imposed by former Mayor Lori Lightfoot that locks in annual property tax increases at the rate of inflation.
Public Safety Committee Chair Brian Hopkins (2nd) has declared the mayor’s budget “dead on arrival,” arguing there are nowhere near the 26 votes needed to revive the head tax at any level, let alone at $21 a month per employee.
Two other members of Johnson’s leadership team have told the Sun-Times they “can’t imagine” a final budget without at least some increase in a $9.50 a month garbage collection fee that’s been frozen since its 2015 inception, recoups just 20% of the real cost of the service and pales by comparison to surrounding suburbs and cities across the country.
It’s Lee’s job to help deliver the 26 votes needed to pass a budget.
Last year, Johnson’s budget squeaked through the City Council after a protracted stalemate in which council members unanimously rejected his proposed $300 million property tax increase and refused to support a property tax hike of any size.
This budget could require even more horse trading and arm-twisting.
“In Springfield, the governor puts forward a budget … It passes at 4 a.m. the last night of the session. This is how budgets are passed everywhere,” Lee said. “There’s a lot of back-and-forth.”