Chicago City Council Sidesteps Mayor, Passes 2026 Budget

Chicago’s City Council overruled Mayor Brandon Johnson in dramatic fashion on Saturday, approving a 2026 budget that scraps his proposed corporate head tax and commits more cash to the city’s deeply underfunded pension systems.

The 30-18 vote capped weeks of infighting and marked a rare power grab by a coalition of mostly moderate and conservative aldermen, who wrested control of the budget process from the mayor’s office, Crain’s reported. Their plan removes Johnson’s $33-per-employee monthly head tax on large companies with 500 or more employees, and accelerates pension payments in hopes of shoring up the city’s balance sheet and avoiding another credit downgrade.

The tax, based on one enacted in 1973 and eliminated under Rahm Emanuel in 2014, charged companies with 50 employees or more $4 per worker per month at the time, according to the nonpartisan Tax Foundation, as well as the Institute for the Public Good, which produced a policy paper in September in support of the proposal.

The concept was derided by the city’s business community as an anti-growth penalty. The Illinois Policy Institute came out against the head tax, as did the Chicagoland Chamber of Commerce this summer.

While the budget could still be tweaked later this year or into 2026, the message was clear: Any changes will now flow through the City Council, not the mayor’s office. Alderman Pat Dowell, the 3rd Ward Democrat who backed the plan, called it a “living document” that can be amended as needed.

Johnson floated the possibility of a line item veto, though he’s sent mixed signals. Overriding a veto would require 34 votes — a threshold the Council bloc doesn’t yet have but believes it can reach. Alderman Gilbert Villegas warned that a veto would equate to a shut down, arguing some holdouts would back the budget rather than risk starting the year without one.

The death of the head tax spares large office users and employers a new levy, a key concern as downtown vacancies remain elevated. But the budget also includes higher taxes on rideshare trips and alcohol sales, and most notably, a jump in the city’s lease tax to 15 percent from 11 percent.

That tax hits a broad swath of activity, from cloud computing contracts to construction equipment rentals, adding costs for developers, owners and tenants alike.

Johnson blasted the Council plan as fiscally shaky, arguing it relies on overestimated revenues, legally questionable taxes and unworkable spending cuts that could blow a $176 million hole midyear. He also sharply criticized a plan to sell off delinquent city debt to private collectors, a move he said would disproportionately hit low-income residents.

Even without a veto, the fight isn’t over. Johnson and his allies could push amendments before year-end, while aldermen are already eyeing Springfield to petition for expanded taxing authority.

— Eric Weilbacher