Chicago Mayor Brandon Johnson included in his FY2026 city budget proposal a "Community Safety Surcharge," which would be paid by corporations in the form of a $21 per employee head tax. Revenues would be used to support programs such as youth employment, violence intervention and mental health assistance for police. The proposal for an added corporate tax comes at a time when the city faces a $1.2 billion shortfall.

The head tax would apply to Chicago corporations that employ 100 or more full-time employees who perform 50% or more of their work within the city limits of Chicago. The rate, effective January 1, 2026, would be $21 per employee with annual increases thereafter of the lessor of the Consumer Price Index (CPI) or 5%. (City of Chicago, 2026 Budget Overview, p. 190.)

The tax would produce an estimated revenue of $100 million in the first year and potentially more in future years due to the proposed automatic increases to the tax rate.

According to a statement from Mayor Johnson, "97% of businesses will not be impacted by this new fee … [o]ur mom and pop stores, our local restaurants, our small and medium-sized businesses will not pay a penny more in taxes." (Mayor Brandon's Prepared Remarks, FY2026 Protecting Chicago Budget.)

Background

In 1973, then Mayor Richard J. Daley successfully passed a $3 per employee head tax that applied to Chicago businesses of 15 or more employees.

In 2011, then Mayor Rob Emanuel was successful in phasing out the tax by 50% in 2012 and a complete elimination of the tax in 2014. Mayor Emanual stated that, "Eliminating the head tax is the right thing to do for businesses big and small and it's the right thing to do to secure Chicago's future." (Mayor Emanuel press release, November 2, 2011.)

What's next?

Before voting on Mayor Johnson's proposed FY2026 budget, the City Council will conduct hearings, including at least one public hearing, in October. In November and December, additions or changes could be made to the proposed budget based on public comments gathered in October and other analysis. The City Council must approve a final balanced budget by December 31, 2025, and it is effective January 1, 2026. (City of Chicago Office of Budget and Management.)

Developments in the FY 2026 budget approval process are available here.