A New Revenue Measure to Close the Budget Gap

01 — How Did We Get Here?

Chicago's significant budget gap

The City of Chicago is facing up to a $1.2 billion gap in the corporate budget for FY 2026 equaling the historic gap the city faced coming out of COVID in 2021. There are a number of factors that have led to this deficit that the city is facing:

• Deferred pension payments by previous administrations that mean the current administration has to contribute more to be on track.
• Expenditure growth over the past 5 years (8%) has outpaced revenue growth (5%) due to inflationary pressures and contractual increases without significant growth in economic activity or revenues.
• Failure to enact revenue measures that tax corporate profits and extreme wealth.
• Decreased revenue from the state due to changes in the percentage of the Local Government Distributive Tax (local portion of the state income tax) and Personal Property Replacement Tax (PPRT, state corporate taxes for cities) that local governments receive and overall falling revenues of the PPRT.

Additionally the city is facing threats of funding cuts from the federal government that could lead to an even wider deficit.

It is important to note that as this budget deficit has grown, the public good has steadily eroded. At moments of financial distress - manufactured by poor fiscal and tax policy, we have seen an increase in privatization, corporate subsidies, and programmatic cuts rather than an expansion of revenue to improve quality of life for all Chicagoans.

These fiscal policy decisions from previous administrations have enabled the growth of income inequality by reducing the supports people need to escape the impacts of past discrimination and harm and have made the city less affordable by failing to mitigate the impacts of the market on rent, transportation, and food costs. Ultimately, these decisions have hurt the well being of many Chicagoans.

03 — The Role of Corporate Taxation

How corporate taxation has played a role

Corporations in Chicago are contributing to the trend of growing income inequality by overcompensating their top executives, paying below living wages on average, and failing to pass on the impacts of tax cuts by providing wage increases to employees or creating more jobs. The corporations with the top paid executives in Chicago have extremely large ratios between the highest paid employee and the median salary. The average ratio was 380 to 1 while McDonald's ratio is 1,014 to 1 with a median salary of $17,000. Nearly 50% of those corporations' median salaries fall below the $68,560 needed to afford a 2-bedroom apartment in Chicago.

For the last decade, corporations in Chicago and across the state have paid less and less taxes into supporting public infrastructure, and services for the public good.

• In 2014, Rahm removed the Chicago Head Tax that was for big businesses (businesses greater than 50 employees) that went towards city operational funds
• In 2017, Trump enacted the Tax Cuts and Jobs Act (TCJA), which slashed the top federal corporate tax rate from 35% to a flat 21%—the largest corporate tax cut in U.S. history. This wasn't just about rates; it was about expanding tax expenditures — loopholes, credits, and abatements — that have grown dramatically, diverting billions annually from public coffers.
• Corporate tax revenues dropped sharply in the first few years after the TCJA's enactment. The Congressional Budget Office (CBO) attributed most of this decline to the reduction in the corporate tax rate. For example, the effective tax rate for active corporations decreased from 26.4% in 2017 to 12.5% in 2018.
• The total tax subsidies for corporations from 2018-2022 were $275 billion – put that in comparison to the $168 billion it would cost to eliminate poverty in this country.

Who benefited from these tax breaks?

Despite the theory that reducing taxes on corporations will lift all boats, studies on the 2017 TCJA reveal that almost all of the benefits flowed to the very top—49% to firm owners, 11% to executives, and 40% to high-income workers (those in the top 10% within their firms). A staggering zero percent went to low-paid workers.

Executives alone pocketed an estimated $13.2 billion annually, a pay bump of roughly $50,000 per executive, while median workers saw nothing. In fact, 81% of the TCJA's corporate tax cut benefits were captured by the top 10% of the U.S. income distribution. This has directly fueled the widening chasm of income inequality, with the share of wealth held by the top 1% surging from 22.8% in 1989 to 30.8% in 2024, while the bottom 50% saw their share shrink. The Gini coefficient, a key measure of income inequality, has steadily risen from 38.3 in 1990 to 41.8 in 2023. In Chicago, during that same time period, the Gini coefficient rose from .28 to .5235, an 87% increase.

Job growth & tax breaks for corporations

The notion that "tax breaks create more jobs" is a myth that has been thoroughly debunked by empirical evidence. Research consistently shows that while corporate tax cuts may boost profits and shareholder payouts, they do not reliably translate into broad-based job creation or higher wages for the majority of workers. This could demonstrate that other factors, like access to a skilled workforce, market demand, and robust public services, are more influential in driving economic activity than tax cuts alone. Indeed, studies suggest that when tax revenues are strategically invested in public services—like infrastructure, education, and public safety—they can actively promote economic development and job growth, far more effectively than simply cutting taxes.

The downstream effects of decreasing corporate tax revenue

Taxes aren't raised just for the purpose of raising revenue – those funds flow into city, county, and state infrastructure that allow businesses to operate, and support families in all income brackets. The decrease in corporate tax revenue not only decreased what was possible (such as closing the poverty gap), but also triggered disinvestment across the federal government. We see this disinvestment in the passthrough of federal grants at the state and local level – especially in moments like now, where HR.1 BBB will result in deleterious effects on our public infrastructure.

The expansion of corporate tax cuts in the Big Beautiful Bill

With the passage of the "Big Beautiful Bill" through Congress on July 3, 2025 – we will see a further expansion of corporate and ultra wealthy tax cuts, paid for by – increasing our debt burden as a country by more than $3 trillion, and reducing investments in the public good – including the elimination of 11.8 million peoples' healthcare, a sharp expansion of the carceral state through a $4.8 billion investment in prisons and a $76 billion investment in immigration enforcement and detention, and a degradation of public infrastructure through the elimination of nearly $2 billion in green building funding.

Interactive

The revenue estimator

The report sets the proposal at a 5% excise rate, projecting $1.5 billion in revenue, with 5% of that seeding the Small Business Economic Growth Fund. Drag the slider to see how the projection scales — and what the small-business fund would hold — at other rates.