Head tax to be axed 6 months earlier than expected, mayor says
BY FRAN SPIELMAN City Hall Reporter September 24, 2012 11:52AM
Mayor Rahm Emanuel | Scott Stewart!~Sun-Times
Updated: October 26, 2012 6:12AM
The employee head tax despised by business and denounced by Mayor Rahm Emanuel as a “job killer” will be completely eliminated on Dec. 31, 2013, six months earlier than planned, the mayor said Monday.
Rebounding revenues and higher than expected savings, primarily generated by participation in the city’s so-called wellness program to reduce skyrocketing health care costs are apparently paving the way for Emanuel to move up his timetable to get rid of the head tax.
Emanuel campaigned on a promised to phase out the $4-a-month employee head tax over four years — $1 at a time.
Last year, he opted to do it twice as fast to send a strong signal about his efforts to improve the city’s business climate.
The revised plan dropped the tax to $2 per employee on July 1 and called for the other $2 to be eliminated on July 1, 2014. The $4-a-month tax generated $23 million in annual revenue.
On Monday, the mayor moved up the timetable once again. He dropped the surprise when asked how he felt about a proposal from Ald. George Cardenas (12th) to impose a $5-a-month “security fee” on homeowners and businesses to generate the $70 million needed to hire 700 additional police officers.
“I’ll be presenting my budget [on Oct. 10]. It will not have an increase in property taxes. It will not have an increase in the sales tax. It will not have an increase in the fuel tax. We will hold the line on that two years in a row. And in fact, we will be actually eliminating the per-employee head tax in my budget,” the mayor said.
“So in two years, what I pledged to do over four — which we had debated as a city for over a decade — will be eliminated.”
Jerry Roper, president of the Chicagoland Chamber of Commerce, applauded Emanuel for eliminating the tax, what has been the single biggest disincentive to business growth in Chicago.
“He has lived up to his campaign promise. This is something the chamber has been pushing for years. We always felt it was a regressive tax” that penalized businesses for additional hiring, Roper said.
“When you look at places like Jewel that pay over $25,000 a month, those large employers have really been getting hit. Businesses will celebrate this and invest that money back into their employees — not only by hiring more people, but providing more training” for the employees they already have.
As for Cardenas’ proposed security fee, the mayor did not take a stand. He simply noted that 255 officers are in the police academy and that 450 to 500 would be in training by the end of the year. That’s barely enough to keep pace with retirements.
Former Mayor Richard J. Daley proposed the head tax in 1974 to ward off a city income tax. It has been a giant thorn in the side of business every since.
In 1994, Daley lopped a dollar off the head tax, excused businesses with fewer than 50 employees and said it would be the first step toward a gradual phase-out.
It never happened. Three years later, union leaders agreed to a series of pension reforms intended to free up enough cash for a $20 million property tax cut, a $200 million bond issue for neighborhood improvements and another round of head-tax relief.
Once again, the head-tax promise was broken.
Three years ago, Ald. Tom Tunney, owner of Ann Sather’s Restaurants, and downtown Ald. Brendan Reilly (42nd) proposed a four-year phase-out to stop an avalanche of private-sector layoffs, only to have Daley reject the idea
Instead, Daley proposed waiving the head tax for two years, but only for newly-hired employees.
Tunney tried again last year, by introducing an ordinance that would phase out the tax over four years, only to be outdone by Emanuel — both last fall and again on Monday.