By Illinois Review
Chicago Mayor Brandon Johnson on Wednesday proposed a $17.6 billion budget for 2027 that revives a controversial corporate head tax rejected by the City Council last year, while also raising taxes on cloud computing and leased equipment.
The proposal is designed to close a projected $882.4 million budget gap and comes just four months after Illinois Gov. JB Pritzker signed a record $55.9 billion state budget that included hundreds of millions of dollars in new taxes and revenue measures.
For businesses operating in Chicago, the combined financial burden continues to grow – raising questions about whether Illinois’ Democratic leaders are making it increasingly difficult for employers to remain competitive.
Under Johnson’s proposal, businesses with more than 125 employees would pay $25 per worker each month, or $300 annually per taxable employee. A company with 500 taxable employees would face a $150,000 annual tax bill.
And here’s the catch: Unlike corporate income taxes, the head tax is based on employment, not profitability. That means businesses could lose money and still owe the tax.
Johnson’s administration estimates the measure would generate $101 million annually, with tax credits available for employees working in designated economically disadvantaged areas.
The mayor, who calls the proposal an “equitable employer tax,” previously attempted to impose a similar tax in his 2026 budget, but the City Council rejected it.
Johnson also wants to increase Chicago’s personal property lease transaction tax from 15 percent to 20 percent, affecting cloud-based software, equipment rentals and other commercial transactions.
That increase alone is projected to generate another $234 million.
And despite previously opposing borrowing to cover police misconduct settlements, Johnson’s latest proposal includes approximately $480 million in borrowing to address those obligations.
The tax proposals are already encountering significant opposition.
In September, 29 Chicago aldermen – a majority of the City Council – signed a letter opposing a corporate head tax or other measures that would increase the cost of creating and maintaining jobs.
Meanwhile, businesses across Illinois are already facing additional financial pressure from Pritzker’s FY2027 state budget.
The governor’s budget includes changes to corporate net operating loss deductions expected to generate hundreds of millions in additional revenue, a new fee on large social media platforms projected to raise $200 million, and new taxes affecting digital assets and fantasy sports operators.
Lawmakers also approved a digital advertising tax, although its collection faces legal and implementation questions.
Pritzker has defended his budget as balanced and focused on affordability, while Johnson argues that wealthy corporations must contribute more to fund essential city services.
For employers, however, the financial reality extends beyond political talking points. Between Springfield and City Hall, businesses face higher taxes and operating expenses while neighboring states compete to attract investment, jobs and economic development.
And as Johnson seeks another $335 million from the proposed head tax and lease tax increase, the debate is no longer simply about closing Chicago’s budget deficit.
It’s about the long-term economic consequences of making Illinois an increasingly expensive place to operate a business.
The question now is whether Pritzker and Johnson can continue raising the cost of doing business without eventually driving away the very employers whose tax dollars help fund their governments.
