Cutting Head Tax Means Relief For Large Employers

In an effort to bring more jobs to Chicago, Mayor Rahm Emanuel introduced an ordinance last Wednesday that would halve and later eliminate the so-called head tax that the city’s largest employers pay.

Businesses with at least 50 full-time workers pat a $4 monthly tax for every employee. Under the mayor’s proposal, the head tax would be halved to $2 beginning in July 2012 and cut completely by 2014.

The mayor’s office calls the head tax a “job killer.” It discourages businesses from settling in Chicago, said Assistant Press Secretary Tom Alexander.

The mayor promised earlier this year, while campaigning for his first term, that he would cut the head tax, even though it generated $35 million in revenue for the city in 2009 and 2010.

The mayor’s proposal must first be considered by the Finance Committee before it can be passed by the City Council and signed into law.

“It punishes people who are successful,” said Ald. Michele Smith (43rd).

Smith said that as restaurants in her Lincoln Park ward grow to more than 50 full-time employees, they get hit with the head tax, which cuts into their profits and discourages them from expanding.

Large employers in the Loop are hit particularly hard by the head tax, said Ty Tabing, executive director of the Chicago Loop Alliance.

Dominick’s, which employs about 20,000 workers in Chicagoland, pays about $80,000 every month.

It’s “a tax only charged for the privilege of working in Chicago,” said Jerry Roper, president and CEO of the Chicagoland Chamber of Commerce.

Although the Chicagoland Chamber of Commerce and the Chicago Loop Alliance applaud the head tax removal, they say the city must do more to be business friendly, like reducing property taxes and other fees.

Chicago is “a city that is going to be known for its taxes, not its parks and trees,” said Roper.

Tabing said he hopes the mayor follows through on his promise to keep a property tax hike off the table when he unveils his 2012 budget next week.

In addition to high real estate taxes, businesses looking to make their home in Chicago face one of the highest hotel and motel taxes in the country, along with steep cab surcharges and rental car taxes that discourage business travel, said Roper.

“We also have a train wreck happening when we have to combine mandated health care and jobs by 2014,” said Ald. Tom Tunney (44th).

Tunney introduced an ordinance to cut the head tax in 2009, but did not see it passed under then-Mayor Richard M. Daley.

Tunney, the owner of Ann Sathers Restaurants, said the economy and impending federal insurance mandate have pressured many employers into hiring more contractual, part-time and seasonal workers — who aren’t required to be given employer based health-care.

Roper feels confident that once employers no longer have to pay the head tax, they will reinvest some of that money into employee health care.

“That might take some of the sting” out of providing employees with government-mandated health care, said Roper.