Editorial Perspective: Johnson’s Response to Tax Ideas Requires More than Distance

Only those closest to Chicago mayor Brandon Johnson will know if the $12 billion financial plan floated by groups aligned with his campaign the other day was a test balloon or an idea he would like to implement.

Even from afar, a few facts are evident. One thing is that the ideas in the plan, entitled “First We Get The Money”, are anathema for a downtown business community who already view the incoming administration as a bit wary. The second is the precarious position Johnson finds himself in, as progressive activists continue to stress their expectations for the man they worked hard to elect, while he tries to distance himself from their chimerical views.

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The proposal was drafted by two grassroots groups with ties Johnson – Action Center on Race & The Economy, and People’s Unity Platform – and calls for measures like a city wealth and income tax, severe cuts to police spending, and an end to tax increment financing. These ideas may seem good to those who voted Johnson in, but it is important to read all the fine print to understand how many Chicagoans – not just rich people – would be affected if these policies became law.

Some of the ideas that these groups advocate are similar to those Johnson himself advocated, most notably

* Reinstating “head tax”, which is $33 per employee, for companies with 50 or more employees. This will net $106 million in revenue a year.

* Raising the tax on jet fuel at Chicago airports from 5 cents per gallon to 14 cents, raising $96 millions.

* Increasing the real estate transaction fees on sales over $1 million by 1.9 percent, which the group estimates will generate $163 millions.

Progressives also suggest:

* Impose a city income of 3.5% tax on all households with an income over $100,000 per year. The tax would be imposed on Chicago residents and suburbanites who work in the city. This plan would see at least one third of Chicago residents paying some level of city income tax.

* A 0.4% annual wealth-tax on the top 10% of Chicagoans.

* Imposing a tax to encourage landlords to lower rents.

* Taxing financial transaction at Chicago’s financial exchanges

The plan, on the expenditure side, calls for the elimination of all vacant police positions and then a further 9% cut in the budget each year. All new TIF expenditures would be cut, and efforts made to renegotiate existing TIF agreements, like the one for the Lincoln Yards project, or to file lawsuits. A new city bank will issue debt at a lower cost than the private market, which the authors of the proposal claim would save the city.

Two faulty premises are at the core of all these ideas: first, that Chicagoans don’t pay enough taxes, and second, that there are plenty of police in Chicago to keep it safe. Johnson is correct to put even more distance between him and these ideas.

Terry Duffy, the CME Group’s chief executive officer, has already warned that the exchange will move out of the city if taxes become too high. Caterpillar Boeing Citadel and other major employers have already left the city. Guggenheim Partners will follow.

These departures are unlikely to cause concern for the authors of this report or those who align themselves with them. After all, these are bad, big corporations. The report’s authors might want to consider the impact of these taxing ideas on Chicago families and workers, whom they care about more.

Crain’s Jack Grieve stated on May 1 that Chicago residents must earn $172,600 per year to have the same purchasing power as an average American earning $100,000. To sustain families earning even this much, the city must have a stable of employers who can create and support jobs that pay decently. Head taxes reduce job growth. Wealth taxes are likely to affect middle-class families who save for retirement and college.

The adviser was asked to comment on the mayor’s attitude towards these proposals. “If we were in favor of these ideas, we would certainly have said so.” But, despite many chances to oppose these measures, she only said: “Everyone should have the right to voice their opinions.”

This is not very comforting. The pushback of some observers, who are quick to say that these ideas would die on arrival in Springfield where many would need to be approved before they can be implemented, is also not comforting. It’s important to communicate, especially when the confidence of investors and employers in Chicago is waning. If the mayor is not seriously considering a city income or wealth tax, financial transactions tax, or any other idea in the report, then he should say it loudly and unambiguously.