Mayor Brandon Johnson is proposing a new tax on large employers to help close the city’s budget deficit. Business leaders and City Council members are pushing back over concerns about hiring, investment and the cost of operating in Chicago.

Chicago is facing an approximately $882 million budget shortfall, and Mayor Brandon Johnson wants large employers to contribute more toward closing it. His proposed 2027 budget includes a corporate head tax that would charge businesses with more than 125 employees $25 per worker each month. The administration estimates the tax would raise approximately $101 million annually, but the proposal is already facing resistance from City Council members and business groups. As ABC7 Chicago reported, the dispute centers on how the city should pay for public services without raising residential property taxes.

The tax would affect approximately 2.8% of registered corporations, according to the mayor’s office. A company with 200 employees, for example, would owe $60,000 annually if all 200 workers were subject to the tax. Businesses operating in designated economically disadvantaged neighborhoods could qualify for rebates. Johnson argues that the measure would generate revenue while encouraging companies to invest in communities that have historically received fewer economic opportunities.

Opponents worry that taxing companies according to employee counts could discourage hiring. Unlike a tax based on profits, a head tax applies even when a business is struggling financially. Companies considering expansion might factor the additional expense into decisions about staffing or where to locate new operations. Twenty-nine alderpersons have already expressed opposition to the measure, making its passage uncertain.

The mayor’s position is that large employers benefit from Chicago’s roads, public safety, transportation and other services and should help finance them. But the proposed tax would cover only about 11% of the budget shortfall. The city would still need hundreds of millions of dollars from other revenue measures, spending reductions or financial adjustments. Johnson’s broader budget also proposes changes to taxes affecting cloud computing, equipment rentals and sports betting.

For residents, the debate comes down to who ultimately carries the cost of running the city. Higher business taxes could help protect homeowners from additional property-tax increases, but companies may respond by adjusting prices, hiring or investment. Cutting city spending presents another trade-off if reductions affect services residents depend on.

The City Council must negotiate a budget before the new fiscal year. If lawmakers reject the head tax, they will need to identify another way to replace the projected revenue or reduce spending. If they approve it, Chicago will have to monitor whether the tax delivers its expected revenue without discouraging employment. Either way, the city cannot avoid the underlying financial problem: its obligations are growing faster than the revenue available to pay for them.