Editorial: Brandon Johnson and friends think it's ‘a privilege to do business in Chicago.' Wrong.

Chicago Tribune

4 days ago

In the later years of Richard M. Daley's mayoralty and especially during the tenure of Rahm Emanuel, the city of Chicago served as a magnet for corporate headquarters relocations, particularly from the suburbs.
United Airlines moved its headquarters to Willis Tower from Elk Grove Village, shifting thousands of employees to the city. Kraft Heinz consolidated its base in Chicago from Northfield. McDonald's moved its home office to the West Loop from its longtime base in west suburban Oak Brook in 2018. These are just a few of the examples.
At the time of these moves, the city was perceived as hot. Even companies that didn't go so far as to relocate their headquarters to Chicago opened satellite offices in the city, believing that they needed a physical presence to attract younger workers.
The era we're talking about wasn't that long ago — less than a decade — but it feels like ancient history.
Post-pandemic, downtown Chicago lost its mojo and, unlike New York City, has failed to recover adequately in the midst of relentless fiscal crises and poor municipal leadership. Chicago's progressive mayor, Brandon Johnson, routinely describes the corporate decision-makers in his city as the 'ultra-rich' (when he refers to them at all).
With Johnson declaring on Tuesday that the city's finances are at a 'point of no return' — whatever that means — the mayor and his progressive allies believe they may have found the answer to their seemingly never-ending quest for massive revenue infusions that affect only the wealthy. A heretofore obscure advocacy group, the so-called Institute for the Public Good, has proposed a new city tax on companies and other large employers that would require them to pay 5% of their total payroll for anyone working in the city who makes $200,000 or more (including noncash compensation like stock options).
The group estimates such a levy would generate $1.5 billion a year. Voila! A Chicago budget deficit now topping $1 billion in 2026 would disappear thanks to something this group pitches as a 'tax on the privilege of doing business in Chicago.'
The group in a July release said the initiative was based on a similar tax Seattle passed several years ago. Seattle's 'JumpStart tax,' as that city branded the levy, 'has exceeded revenue expectations since 2020 — generating $1.2 billion in four years,' the group claimed.
What the Institute for the Public Good neglected to disclose was that revenue from the JumpStart tax fell short of projections in 2024, with Mayor Bruce Harrell acknowledging that major corporations had moved 'thousands of high-paying jobs' out of Seattle to evade the tax. Amazon, for example, shifted jobs from Seattle to Bellevue, Washington.
'Large corporations should pay their fair share … but we also must recognize businesses will make choices based on their bottom line,' Harrell said.
Indeed. That's how a competitive economy works. Its rules apply to municipalities just as much as they apply in the business world.
The predictable corporate response to Seattle's tax, it should be noted, came even though the rates Seattle is charging are considerably less than the 5% Johnson and some progressive aldermanic allies are contemplating. In addition, the state of Washington doesn't charge an income tax on individuals or businesses. Illinois, of course, already charges a corporate income tax exceeding 9% — the second highest in the country.
Imagine how much more quickly Chicago corporate employers would respond to such an egregious tax given the tax burden they already shoulder 'for the privilege of doing business in Chicago.' Such a tax would be aimed straight at the heart of companies that in the past have stuck by this city through thick and thin.
Think Northern Trust. Think law firms like Jenner & Block.
And, yes, United Airlines. So far, at least.
For the last several years, there's been speculation about a potential United headquarters move to Denver, where the company acquired 113 acres near one of its hubs and has major growth plans. United has denied plans to move, but a tax along these lines easily could have Chicago's hometown airline calling another city home. Who could blame them?
This tax could also be such a boon for the likes of Evanston that it boosts the market for high-rise office towers, soon to be filled with new offices for companies that used to base their high earners in Chicago. Suburban municipalities will be licking their lips.
Already, Chicago in recent years has lost an alarming number of major corporate headquarters to locales perceived as friendlier to business. Three years ago, Caterpillar moved to Texas. Boeing decamped for the Washington, D.C., suburbs the same year. And, perhaps most famously, Citadel, one of the nation's most prominent hedge funds and market makers, left Chicago — where it was born — for Miami in 2022.
Citadel's workforce once numbered 1,100 in downtown Chicago, most of whom were compensated above the $200,000 threshold Mayor Johnson now wants to tax. In a few short years, Citadel's Chicago headcount now is at just 250, we understand.
Once company bosses make up their minds that the 'privilege of doing business' in a certain place is no longer worth the expense and headache, it doesn't take long for them to act.
Progressives who lack respect for billionaires like Citadel CEO Ken Griffin may feel they can afford to sniff at the loss of hundreds of his highly paid employees. But the departure of those 850 Citadel workers has meant hundreds of millions in lost spending power, including tax receipts.
Keep chasing folks like that out of town, and that 5% tax soon will need to be raised to something like 7.5% and surely more later.
That's how once-flourishing cities like Chicago end up circling the drain.