Income & Wealth Tax Concepts will be DOA and serve as a warning to any business that wants to invest in the city

Johnson allies push $12 billion financial package, including wealth and income taxes
By Greg Hinz

 

it's early yet, but early indications are that perhaps Mayor Johnson does not understand the problem 

Credit: Evan Wise/Unsplash


Allies of Mayor Brandon Johnson today are rolling out a $12 billion financial proposal that doubles down on controversial tax-hike ideas pitched by Johnson during his campaign and adds a few more — including enactment of a city wealth tax and income tax, deep cuts in police spending, and an effective end to all tax-increment financing projects.

Authors of the proposal, which also includes a tax on vacant high-end rental apartments, say they’re not fronting for Johnson and suggest they rather are trying to hold his feet to the fire and push him to stand by his campaign promises in a way they believe former Mayor Lori Lightfoot did not.

Earlier
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Whatever the motivation, the proposals potentially affect not only business but hundreds of thousands of middle-class Chicagoans as well as suburban residents who work in the city. It comes in the same week CME Group chief Terry Duffy threatened to move his exchange out of town if Chicago’s tax situation turns toxic.

The report is titled, “First We Get the Money: $12 Billion to Fund a Just Chicago.” It comes from the Action Center on Race & The Economy and the People’s Unity Platform. (Read the full proposal below.)

Both groups have strong ties to the Chicago Teachers Union, for which Johnson worked as a paid organizer until shortly before the election and which was the biggest backer of his campaign. For instance, CTU President Stacy Davis Gates serves on the ACRE board, and her chief adviser has been named as one of Johnson’s deputy mayors. Report co-author Saqib Bhatti serves on Johnson’s transition team, with a seat on the Economic Vitality & Equity Subcommittee. And the People’s Unity Platform is a joint project of CTU and another strong Johnson ally, the Grassroots Collaborative.

“Communities that invest in their people are safe communities,” the report asserts, echoing one of Johnson’s major campaign themes. “The proposals in this report would generate $12 billion in new revenue and savings that we could invest in our people and neighborhoods.”

Some of that money would come from ideas Johnson put on the table during the campaign. Included:

• Reinstating the “head tax” of $33 per worker on companies with at least 50 workers, netting $106 million a year;
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• Boosting from 5 cents to 14 cents the tax per gallon on jet fuel used at Chicago’s airports, raising $96 million; and

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

Added to that list are several major items.

The first is a move to impose a city income tax of 3.5% on any household with income above $100,000 a year. This tax would apply to both Chicago residents and money made by suburbanites employed in the city, and would yield an estimated $2.1 billion a year.

The group bills this tax as a levy on “high earners.” U.S. Census Bureau data indicate that the average Chicago household now has annual income of $100,347. Median income is less at $65,781 — $80,511 among households headed by someone aged 25-41 — meaning that at least a third of city residents would end up paying at least some city income tax if the groups' proposal goes through.

Bhatti, in a phone interview, said the tradeoff is worth it. People want good services and, “if you want those, there’s a cost. You have to pay up,” he said. Beyond that, shifting to an income tax would reduce pressure on the property, tax, he said.

Another $960 million would come from a 0.4% annual “wealth tax” on the richest 10% of Chicagoans. The report’s co-author, Gabriela Noa Betancourt, said she does not have adequate background data to say how much someone would have to be worth to pay the tax, but stressed that only personal liquid assets like stock holdings would be covered, with retirement accounts and real estate exempt.

In Philadelphia, a similar proposal would apply to those with income of as little as $120,000, according to reports there. In Illinois, a similar levy proposed by state Rep. Will Guzzardi, D-Chicago, would only apply to those with assets worth at least $1 billion.

A new digital ad tax of 13% would apply to bills for online advertising. Betancourt said it would apply to companies with at least $25 million in digital ad revenue, with only nine large corporations now hitting that mark, including Google, Facebook, Amazon and Twitter.

The tax on luxury-apartment vacancies would apply to landlords who own more than 20 units with rents above the city average. If the unit involved sat empty for more than 12 months, and more than three units were vacant, the property owner would have to pay the equivalent of “rent” to the city. Bhatti said the intent is to pressure landlords into lowering rents to more affordable levels.

And the plan includes a tax of $1 to $2 on financial transactions on the CME and other financial exchanges, with the city getting at least $2 billion.

On the spending side of the ledger, the plan calls for eliminating all vacant positions in the Chicago Police Department, and then cutting the CPD 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.

Johnson during the campaign made a point of saying his plan does not include a city income tax, and had promised to cut “not one penny” from CPD. His spokesman, Ronnie Reese, declined to comment on the rest of the report, noting Bhatti is just one of many transition team members.

Bhatti said many of the bigger ideas contained in the proposal would require approval from Springfield. Such as the transaction tax, which Gov. J.B. Pritzker already has said he opposes, arguing it would hurt the city’s economy.

Bhatti also said Johnson was not briefed in advance on the proposals, but argued that they are in line with the kinds of things the new mayor has supported as a mayoral candidate and in his public life as a Cook County commissioner and political activist. Johnson backers do not want a repeat of what happened in “prior administrations,” Bhatti said, referring to but not explicitly mentioning Lightfoot, who backed off her promise to enact a higher real estate transaction tax to raise money for affordable housing.

“I think it’s appropriate to hold (Johnson) accountable for the promises he’s made,” Bhatti said. “Mayor Johnson ran on a platform that actually included some of these things.”

Bhatti did not indicate whether City Council members are prepared to push for such items. Johnson’s floor leader is Ald. Carlos Ramirez-Rosa, 35th, who also heads the council’s Democratic Socialists of America caucus.

HOW STUPID? IT SEEMS THAT MAYOR JOHNSON HAS SURROUNDED HIMSELF WITH SOME STUPID PEOPLE.