In 2019, the last year prior to our economy being impacted by the COVID-19 pandemic, the city of Chicago budget totaled $10.7 billion. This year, Mayor Brandon Johnson unveiled a $17.3 billion budget proposal for 2025, an increase of $6.6 billion over 2019. In a mere six years, city government spending has grown 62%, and we are still left wondering what we have to show for it.
At a time when inflationary challenges continue to plague both Chicago residents and businesses, City Hall is, yet again, leaning on taxpayers to pay for the ballooning increase in the cost of government. Without proposing any comprehensive list of spending reductions or efficiencies, the city is looking to increase a growing list of taxes to fill its nearly billion-dollar budget gap, which will hurt every Chicago resident and business owner. Instead of finding ways to ensure residents have the fiscally responsible government they deserve that prioritizes economic growth and transparency, the city is asking taxpayers for even more, with no clear plan for reasonable spending controls or improved city services.
Perhaps the most ill-advised of these latest harmful proposals that has been floated is an increase to the Personal Property Lease Transaction Tax, or so-called cloud tax, which is expected to impose an $128 million dollar burden on residents and businesses alike. To be clear, this is a tax on employing people in Chicago, akin to a job-crushing head tax.
While a cloud tax may sound like a nebulous cost that does not impact everyday Chicagoans, nothing could be further from the truth.
The proposal increases the cloud tax to 11%, making it among the highest in the nation — higher even than the city’s exorbitant 10.25% sales tax. The cloud tax is imposed on numerous types of leases, but increasingly capturing cloud-based software used by nearly every employee. For businesses, from the mom-and-pop shop down the street that relies on software services to manage their books, employee time-tracking, and other essential day-to-day operations, to mid-to-large employers that rely on these software tools to increase productivity, this tax increase will not go unnoticed. Individuals who have come to rely on similar software-based services to work on basic personal or work-related ventures will also bear the brunt of this tax.
While the cloud tax is the highest dollar-amount tax being discussed, this does not mean that the other laundry list of tax increases will not hit most every Chicago resident’s wallet in the coming year. Whether it is additional property taxes, amusement taxes on streaming services, parking and transportation taxes, bag taxes and other fee increases, these tax and fee increases go beyond a so-called nickel-and-dime approach. From the business owner dealing with rising costs of goods, labor and lingering effects of record inflation, to every Chicago resident who continues to be impacted by the high cost of groceries, a sluggish job market, and higher costs of living, this taxing regime is the wrong message at the wrong time.
Chicago already has among the nation’s highest property tax burden and among the highest combined state and local sales tax rate when compared to peer cities. Although there are many things that continue to build up Chicago as a world-class city, we are in a near-daily competition for jobs and private-sector investment nationally and globally. The last thing the city needs is another host of new taxes and anti-business policies that will disincentivize businesses from employing people in Chicago, and disincentivize businesses from coming to or staying in Chicago. Residents and businesses cannot afford for the city to continue to be a greater outlier, risk harming our ability to recruit top talent and investments and send the wrong message to growing industries looking to build or grow in Chicago.
The Chicagoland Chamber of Commerce and the business community understand government is not free, however we also believe businesses and residents deserve a government that does not immediately turn to revenues before identifying reasonable spending reductions that protect our essential city services, including our first responders. We know the best long-term, sustainable solution to overcome budget deficiencies is not continuing to tax businesses that employ our residents and generate revenue to invest in critical city services, but rather enacting policies that promote growth.
The 2025 Chicago budget process does not give residents or the business community much confidence for processes moving forward, but there is still time to stop this storm in its tracks. We urge the mayor and City Council to embrace shared sacrifice and provide Chicagoans a truly comprehensive and exhaustive plan for making government more efficient and improving services before any demands for more taxes are made.
Jack Lavin, president and CEO, Chicagoland Chamber of Commerce.
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