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Ald. pushing phase-out of employee head tax

Updated: August 3, 2011 6:34PM

The $4-a-month employee head tax despised by Chicago businesses would be phased out over four years, depriving the city of $19.6 million in annual revenue, under an ordinance quietly introduced by a North Side aldermen.

Ald. Tom Tunney (44th), owner of Ann Sather restaurants, has been on the warpath against the head tax since he was appointed to the City Council by then-Mayor Richard M. Daley in 2002.

Two years ago, Tunney 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.

At Wednesday’s City Council meeting, Tunney re-introduced the ordinance, turning up the heat on Mayor Rahm Emanuel to honor a campaign promise.

Tunney said he’s well aware that Emanuel inherited an annual operating deficit approaching $700 million — and $1.2 billion when unfunded pension liabilities are factored in.

But, the alderman argued that $5 million a year should not be hard to find.

“Eliminating this tax is important to business. I think it can be done. In our search for cost-efficiencies and savings, we can find time to send a signal to the business,” he said.

“We’re gonna bring in businesses to hear what a negative impact it has on their ability to hire new workers. The most important thing we can do is to provide every incentive for people to add to their payrolls. This could be a job creator, which would help the business climate and, ultimately our budget issues.”

Pressed to identify cuts that could be made to offset head tax relief, Tunney could not come up with any “off the bat.” But, he said, “The mayor is aware I’ve submitted this. He campaigned on reducing the head tax. We all have the same goal. I’m gonna try to help him in every way I can to find new revenue.”

Daley’s father, 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, Richard M. 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.

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