Chicago Mayor Warns of Looming Layoffs as Head Tax Fails

Brandon Johnson's push for a corporate head tax was rejected by Chicago aldermen, leading to budget tensions

Feb. 3, 2026 at 7:55pm

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Chicago Mayor Brandon Johnson is warning that city employee layoffs could be coming later this year due to the budget passed without his support. Johnson had pushed for a new corporate 'head tax' on businesses, but the Chicago City Council rejected the proposal and passed an alternative budget that gave Johnson most of what he wanted, excluding the head tax. The mayor is now concerned about revenue shortfalls, particularly from video gaming taxes, and says layoffs of public employees like police and firefighters may be necessary as a result.

Why it matters

The head tax dispute highlights the ongoing fiscal challenges facing Chicago, including underfunded pensions, budget deficits, and strained relations between the mayor and city council. The failure of the head tax proposal shows the limits of relying on new taxes to fix structural financial problems, as similar policies have failed in other cities like Seattle.

The details

Mayor Johnson had proposed reinstating a per-employee 'head tax' on businesses in Chicago, projecting it could raise around $100 million in revenue. However, the Chicago City Council passed an alternative budget that did not include the head tax, leading to tensions with the mayor. Johnson is now warning that the budget projections, particularly around video gaming revenue, may fall short, potentially requiring mid-year layoffs of public employees like police and firefighters. The mayor's push for the head tax was seen as a way to raise revenue without needing approval from state lawmakers, whom Johnson has had a contentious relationship with.

  • In late 2025 and early 2026, Cook County's delay in distributing 2024 property tax revenues created temporary cash-flow constraints for the City and the pension funds.
  • In January 2026, the Chicago CFO issued a memo detailing cash-flow advances made to the city's pension funds to cover near-term benefit payments while awaiting the delayed property tax revenues.
  • On January 26, 2026, the Chicago CFO reported the city is still awaiting about $194 million in property tax-supported reimbursements from Cook County for last year's pension fund payments.

The players

Brandon Johnson

The current mayor of Chicago who proposed reinstating a corporate 'head tax' on businesses as a way to raise revenue for the city without needing state-level approval.

Chicago City Council

The city's legislative body that passed an alternative budget rejecting Mayor Johnson's proposed head tax, leading to tensions between the mayor and council.

Chicago CFO

The chief financial officer of the city who issued a memo detailing the city's need to make cash-flow advances to the pension funds due to delayed property tax revenue distributions from Cook County.

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What they’re saying

“You know, as far as individuals who could be laid off being we're talking about you know, public employees, right? It could be, you know, you know, real serious consequences to workers who are attached to community safety.”

— Brandon Johnson, Mayor of Chicago (WLS)

What’s next

The Chicago City Council and Mayor Johnson will need to continue negotiating the city's budget and finding ways to address the fiscal challenges, including potential revenue shortfalls and pension funding issues, without relying on controversial new taxes like the head tax.

The takeaway

Chicago's ongoing budget battles highlight the limits of using new taxes to fix deep-seated financial problems, as well as the tensions that can arise between a mayor and city council when trying to balance competing priorities and interests. The city will need to find sustainable solutions that address its structural deficits, underfunded pensions, and strained relations with state leaders in order to avoid further service cuts and layoffs.