Chicago Business Barometer issues another warning, and not a hollow one
Chicago’s chronic reliance on ever‑higher taxes and fees is driving away jobs, investment, and residents at the very moment the city can least afford it. In a world where capital and talent are more mobile than ever, Chicago is choosing policies that make the city less economically competitive. Of course the corrosive impact of Chicago’s policies have been made worse by similar state policies that have made Illinois residents and businesses paying the highest taxes and fees in the nation.
A stagnant economy
Chicago continues to lag behind its peers in basic measures of economic performance, yet City Hall continues to pile on new costs. In an economy with shrinking geographic friction, cities now compete head‑to‑head for employers and workers who can move with a mouse click. Policies like the corporate head tax and the expanded tax on cloud services send a simple, damaging signal: Chicago is a more expensive and less welcoming place to do business than rival metros in Texas, Florida, Tennessee, and other areas of the Southeast.
Weak growth, weaker wages
Using the most recent U.S. Bureau of Economic Analysis data, Chicago’s metro economy has posted some of the slowest real gross domestic product gains among large U.S. regions over the past several years, with cumulative real growth in the low single digits. Many comprable peers have achieved gains in the high single digits or double digits. This translates into annual real growth that struggles to reach one percent on average, a rate that is effectively stagnation for a major city and far below what is needed to support rising living standards, public services, and infrastructure.
Wage data tell the same story from a worker’s perspective. Since 2020, average hourly earnings nationally have risen more than 20 percent in nominal terms, while consumer prices have climbed nearly 25 percent, leaving workers across the country slightly worse off in real terms. In a slow‑growth, high‑cost environment such as Chicago, where employers have less pressure to compete for labor and local taxes further erode paychecks, the typical worker is squeezed more than the headline national numbers suggest.
Consumer prices alone don’t capture the full cost of living increases as no state and few cities raised taxes and fees as much as Illinois and Chicago since COVID hit in 2019. Despite receiving $1.9 billion in COVID funding, the city found taxes and fees to raise each year while its school district increased property taxes to the levy limit despite receiving $2.8 billion in federal COVID relief and another $1.3 billion in TIF property tax surplus.
Illinois raised taxes and fees 55 times taking in over $7 billion more annually despite receiving almost $14 billion in federal COVID funding for operations.
Flat job growth, dwindling opportunity
Job growth is the clearest test of whether a city is creating opportunity, and here again Chicago falls short. While national employment has climbed more than five percent since before COVID struck, Chicago’s total employment has barely moved, leaving the metro area effectively flat on jobs over a five‑year period when many competitors have added tens or hundreds of thousands of positions. An economy that fails to add jobs cannot create real leverage for workers, nor can it generate the broad‑based tax base that a healthy city budget depends on.
Chicago businesses just reported the lowest recorded employment score since 2009. For the second consecutive month, zero respondents reported increased employment. The zero net job growth in December marked the 25th consecutive month that Chicago's business activity has declined. During nearly every fiscal quarter since September 2022, employment increased in cities across the country at a higher pace than in Chicago. Chicago’s unemployment would be even higher — but too many Chicagoans have simply stopped looking for work.
This flat-lining job market is not an accident; it is the foreseeable result of policies that treat employers as a bottomless ATM. Each new tax or fee layered onto businesses — from head taxes to sector‑specific levies on technology and services — nudges hiring decisions, expansion plans, and even headquarters locations toward regions with lower costs and more predictable rules. Over time, those marginal decisions accumulate, causing Chicago to lose the very private‑sector growth it needs to sustain middle‑class neighborhoods and fund essential public services.
Runaway spending
Despite this economic stagnation, City Hall has embarked on a spending spree as its total city government budget has grown by a staggering $6.6 billion, or 62 percent, since 2019. This is a pace that dramatically outstrips both inflation and nominal economic growth over the same period. Independent fiscal watchdogs report total city spending since before the pandemic has grown far faster than in other large U.S. cities, driven heavily by pensions, debt service, and public‑safety costs.
Not to be outdone the city’s sister agencies the Mayor’s Office controls saw a similar surge in spending. Chicago Public Schools spending per student has soared nearly 40 percent, even as enrollment dropped nine percent. The CTA’s budget has grown by 40 percent since 2019, despite only recovering 68 percent of pre-pandemic ridership. Despite the city and its agencies receiving nearly $6 billion in federal bailout money, the city and Chicago Public Schools, and Chicago Transit Authority continued raising taxes and fees.
When spending grows substantially faster than the economy, the gap has to be closed somewhere. The “somewhere” has been a familiar mix of higher property taxes, new fees, targeted business taxes, and one‑time fixes, which collectively undermine Chicago’s competitiveness while failing to solve its structural problems. There is a reason Stanford’s City Fiscal Health Dashboard and other national assessments rank Chicago among the most financially stressed big cities in America: Chicago is attempting to spend like a boomtown while growing like a stagnant region.
The great taxable income exodus
The truth is high taxes — not a shortage of taxes — are driving residents and investment away from Chicago and Illinois. In poll after poll, former Illinoisans cite taxes as the primary reason they left the state, followed by dwindling economic opportunity and violent crime. Half of current residents say they would leave the state if they had the means with the overwhelming majority citing high taxes as the principal reason.
Illinois’ tax climate punishes everyone. Chicago's sales tax is second only to Seattle. Commercial property taxes are second only to Detroit. Illinois is set to impose the nation’s highest state and local tax burden in 2026, costing the average household $13,099, or 52 percent more than the national average. Property taxes alone have climbed annually since 2019, with CPS increasing its levy by over $500 million.
What’s been the result of this worsening tax climate? Overall, the taxable income of those leaving Illinois is over $38,000 higher than those arriving. Since 2012, Illinois has experienced a net loss of nearly 60,000 taxpayers making more than $200,000. In 2022, Illinois experienced the second-biggest loss nationally of households aged 26 to 35 with incomes greater than $200,000. Not only is this an immediate loss of taxable income, but it’s also bad for the future of the state: These are young taxpayers with the greatest potential for growth.
The “Ken Griffin effect”
Let’s put to rest the myth that the rich do not pay their fair share. According to the IRS, the top 15 percent of income earners paid roughly 72 percent of all federal income taxes in 2022. The bottom 50 percent pay less than 3 percent. Mayor Brandon Johnson’s fixation on the “ultra-wealthy” ignores the long-term damage this mindset is causing. Chasing high earners out of the state means fewer jobs, fewer investments, and lower tax revenues. The affluent are the most mobile group in society, and they are leaving Illinois in ever-greater numbers.
The story of Ken Griffin — formerly Illinois’ wealthiest resident and a major donor to the city’s cultural life — is a case in point. Griffin’s story illustrates how just one person’s departure can mean the loss of hundreds of millions in tax revenue and economic activity. Griffin alone reportedly paid over $1 billion in state income taxes during the past decade. And he didn’t leave alone. Griffin’s 10,000 employees, their salaries, and their purchasing power left along with him.
Since Griffin’s move to Florida, he has shifted not just his business operations but also his philanthropy. Griffin was the city and state’s biggest philanthropist. Illinois benefitted from more than $650 million in Griffin’s charitable donations, including $130 million to 40 Chicago organizations. Florida is now the recipient of over $300 million in donations and rising, not to mention the hundreds of millions of dollars in taxes and economic activity generated by Griffin and his relocated employees.
Expect the mayor, his former CTU employers, and his left‑wing allies to use the defeat of the head tax to double down on “tax the rich” rhetoric and to blame opponents of the head tax in the City Council — caricatured as a “Corporate Caucus” backed by “greedy, pro‑Trump corporate interests” — for Chicago’s fiscal mess and the lack of investment in neglected communities. This is pure political narrative management.
The mayor refuses to grasp the complexity of the city’s financial problems
The city is simultaneously battling three historic fiscal emergencies: In the city budget, in the schools, and in public transit, the mayor seems unwilling — or unable — to grasp the scale and complexity of Chicago’s financial crisis. Much of this crisis has been exacerbated, not alleviated, by Johnson’s refusal to address unsustainable spending or break with the financially ruinous agenda of the Chicago Teachers Union that finds the city increasingly subsidizing the schools, this year by more than $1.3 billion.
Each of the Mayor’s budgets have prioritized CPS and CTU, bailing out a district that is struggling to afford back‑to‑back record labor contracts. Instead of demanding structural reforms at CPS — right‑sizing chronically under‑enrolled schools, controlling payroll growth, downsizing the massive central and regional offices and aligning labor costs with enrollment — Johnson has chosen to protect CTU priorities and shift more of the burden onto city taxpayers.
A choice, not a destiny
Chicago’s financial demise and continued economic slide are not inevitable. Chicago still boasts enormous economic assets: A diversified private sector, world‑class universities, global transportation links, and a central time‑zone advantage. Nevertheless, these strengths can be squandered if Chicago continues to chase away employers and workers with the highest‑in‑class tax and fee regime instead of fostering growth that expands the tax base and lifts wages.
The path forward is clear: Chicago must freeze and roll back the most distortionary business taxes, restrain spending growth to sustainable levels, and focus relentlessly on policies that encourage job creation and private investment. Most important is for Chicago to stop subsidizing Chicago Public Schools, thereby forcing CPS to operate within its means. With the schools receiving 58 percent of all property taxes and almost 25 percent of all state and 40 percent of all Illinois Federal K-12 revenue, the district has ample resources to meet its needs.
Without this course correction, Chicago’s endless series of tax and fee hikes will not rescue Chicago’s finances — they will simply accelerate the loss of the very growth, jobs, and families that make a city worth saving in the first place. Unfortunately there is no chance of any course correction while Johnson remains at City Hall and his former CTU employers maintain their political stranglehold over their “Manchurian Candidate” mayor and the majority of the City Council.
