Chicago mayor gets budget without his $300M in property tax hikes
Chicago Mayor Brandon Johnson was denied a $300 million property tax hike, then a $150 million property tax hike, then a $68.5 million property tax hike. He got his 2025 city budget, and aldermen forced him to keep his campaign pledge not to raise property taxes.
Chicago Mayor Brandon Johnson on Dec. 17 got his record $17.1 billion budget, propped up with over $181 million in new taxes and fees – but not with the property tax hike he tried three times to pass.
Johnson first pushed for a $300 million hike, which all 50 aldermen rejected. Then he asked for $150 million but was again denied. Finally, it appeared the mayor who campaigned on a pledge of no new property taxes would get $68.5 million from Chicago property owners, but that, too, was denied by aldermen.
Chicago aldermen avoided a city shutdown by passing the budget 27-23 with a few cuts, more debt and $181 million in new taxes and fees. The city with some of the nation’s highest property taxes would get a break, at least during 2025, and at least on property taxes.
Chicago residents still being squeezed
Over $181 million in new taxes and fees are set to hit Chicago residents and businesses as part of the 2025 budget.
Previous analysis by the Illinois Policy Institute showed many of these new tax hikes are regressive, hitting poor Chicagoans the hardest and discouraging important economic activity. The $5.2 million increase in fees on grocery bags is one example. Another is $11.4 million from additional speed cameras, which Johnson labeled during his campaign as “an easy revenue grab by the city” and promised not to increase.\
The largest tax hike comes from a $128.1 million increase in the personal property lease transaction tax, otherwise known as a cloud computing tax. This tax was heavily criticized by business leaders who argue it will make the already difficult task of maintaining Chicago’s tech workforce even more challenging. Despite this pushback, the new tax will be 11%, up from its current rate of 9%, making it the highest among major cities.
Parking garage and valet service taxes were raised from a high of 22% on weekdays to 23.25%. Those who might try to avoid this tax with a rideshare app will have no such luck, with an added surcharge of $2.75 on the weekends for downtown trips. Think you can avoid these cost increases by staying home? Think again. Taxes were also raised on amusement devices and streaming services such as Netflix from 9% to 10.25%. Johnson’s budget may have finally passed, but it comes at the expense of every Chicagoan.
Delaying inevitable debt repayment to make up the shortfall
These tax hikes, while substantial, were still not enough to make up for the total shortfall in Johnson’s initial budget proposals. To fill that gap, spending cuts equal to $154.5 million were approved.
A major cut of $74 million was made to small business grants and the city’s guaranteed basic income program. This program distributed no-strings-attached monthly payments of $500 to low-income Chicagoans earlier in the year. The remaining grant money, which came from the American Rescue Plan Act, expires at the end of 2026 and will instead plug the budget hole.
One of the most critical of these cuts is the $40 million the city is saving from delaying debt payments. The city has decided to spread out the repayments over a longer period, which will add an extra $2 million in interest and other related expenses. This debt originates from the city’s purchase of the Michael Reese Hospital under Mayor Richard M. Daley. Another $10 million was saved from pushing police overtime costs for special events to major sports teams and other entertainment venues.
More savings will come from refinancing debt and other minor cuts.
Short-term budget maneuvers won’t keep Chicago afloat
In addition to these cuts and hikes is the use of short-term funding manuevers and grant money to make up for the shortfall. These include $132 million from the tax increment financing surplus and $139.7 million from the previous year's surplus revenues. Additionally, $286.3 million was recouped through increased “operational efficiencies,” including vacant position cuts. An additional $215.4 million is accounted for through “structural” fixes, $175 million of which relies on Chicago Public Schools to pay for the Municipal Employees’ Annuity and Benefit Fund – a responsibility that Chicago Public Schools has, in turn, tried to push on to the city.
This budget barely passed through the city council for a reason. It represents a concerning pattern of fiscal management that cannot sustain the city's future. By relying on a patchwork of tax hikes, delayed debt payments and one-time funding sources, city leadership has chosen to patch budget holes temporarily rather than address the fundamental issues driving Chicago's financial challenges.
As the city's expenditures continue to balloon – having grown by nearly $6.5 billion since 2019 – Chicago’s budget challenges demand tough but necessary cuts to wasteful projects and ballooning personnel costs and pension costs. Without such reform, Chicago residents and businesses will continue to bear the burden of increasingly creative taxation while the city inches closer to a financial reckoning that no amount of budgetary maneuvering can prevent.