Chicago payroll tax draws opposition from city’s business heads

A group backed by financier Michael Sacks has started funding ads against Chicago’s plan to bring back a tax on large corporate payrolls, drawing the ire of Mayor Brandon Johnson.

Common Ground Collective, which has raised $11 million to drive change at City Hall years before the next mayoral election, is financing six-figure digital and streaming ads, including one that characterizes the proposed levy as $100 million in new taxes. The group is backed by Sacks, chairman of asset management firm GCM Grosvenor and a prominent Democratic donor, and has more than 100 contributors. 

Johnson, who is struggling to pass a budget before the Dec. 31 deadline, has proposed charging companies with at least 100 employees a tax of $21 per worker per month. The tax, once dubbed a “job killer,” would raise $100 million for community-safety programs.

“Frankly I think it’s beneath these so-called business leaders to lie to the public about the community safety surcharge,” Johnson said at a press conference this week, naming Sacks specifically. “My challenge to them is to just explain their reasoning and debate the pros and cons of this proposal.”

Johnson said the proposed tax would affect only the top 3% of large corporations in Chicago.

Sacks declined to comment. Common Ground Collective said in a statement that it stands by the facts it presented and that it has budget documents to prove that the so-called Community Safety Fund makes no new or additional investments in public safety or youth.

Common Ground Collective isn’t alone in opposing the levy. The One Future Illinois political action committee, a group whose leaders have had ties to Rahm Emanuel, is also funding its own ads against the levy. The former Chicago mayor previously called the tax a “job killer.”

Michael Ruemmler, president of One Future Illinois and former adviser to both Emanuel and Barack Obama, didn’t respond to a request for comment.

Other business and political leaders have also previously opposed the plan. Illinois Governor JB Pritzker, a billionaire Democrat, said in October that the proposed levy would repel major employers. Restaurant owners including McDonald’s Corp. have also said it would discourage jobs in the city. 

In a statement to Bloomberg News last month, the fast food chain said franchisees in Chicago “would experience negative impacts on their businesses due to the head tax.”

Craig Donohue, chief executive officer of options powerhouse Cboe Global Markets Inc., expressed his concerns in an interview last month. 

“I always want to see people creating an environment where companies want to be here, they want to hire here, talented people want to live here and they want to work here,” he said. “Anything that has the potential even to get in the way of that, I think undermines our long-term success.”

Budget gap

This isn’t the first time Johnson has tried to pit the city’s wealthy against its financially struggling residents. The progressive mayor last year sought to increase the real estate transfer tax for properties that sell for over $1 million, a proposal that failed.

Chicago is facing a $1.2 billion fiscal gap in its main operating fund as pandemic-era aid winds down while salary, material and pension costs increase. Johnson, who has been reluctant to cut spending, is also not finding support from members of the city council, which needs to sign off on the budget to approve it.

Last month, the city council’s finance committee rejected Johnson’s proposed revenue ordinance, which included the head tax. On Dec. 2, two dozen aldermen put forth an alternative budget that included eliminating the proposed head tax.

“Charging businesses for every employee they hire sends the wrong message at a critical time,” according to the aldermen’s proposed budget. “It’s a tax on the employment Chicagoans need.”

The city’s real estate leaders have also challenged the tax because it would apply only to employees who work 50% or more of their hours inside city limits. 

“The head tax penalizes employers for creating jobs and for bringing workers into the city,” said Amy Masters, the director of government and external affairs at the Building Owners and Managers Association in Chicago. “It risks slowing Chicago’s downtown revitalization.”