Chicago head tax kills jobs

Here’s a little known fact, Chicago taxes employers a monthly fee for every employee. It’s called a head tax and just another reason for business to not locate here.

But now Mayor Daley is considering rescinding the tax. Just for new hires and just through 2011. The vote comes before City Council on Wednesday.

Daley hasn’t been very business friendly, unless you count big fat TIF handouts to places like Willis to renovate some space in the former Sears Tower, or “incentives” to Boeing to relocate here. Blocking Walmart from coming into Chicago and aligning with unions to a degree that Chicago’s convention business is fleeing to less expensive cities. There’s there’s the parking fiasco hurting small businesses particularly along the fringes of the city.

The tax doesn’t seem like a lot but it adds up and sends a message. At $4 per employee, per month, the head tax brings in about $22 million a year, according an editorial in the Chicago Tribune today.

A temporary suspension would be a modest move. A savings of $96 over two years isn’t likely to be the deciding factor when an employer weighs whether to add someone to the payroll.

But collectively the head tax is a significant factor when an employer considers whether to set up shop in Chicago, or the suburbs, or another state. The mayor could make this have real impact by pushing to eliminate the head tax, period.

For as long as the head tax has existed, it has been emblematic of the city’s mixed message to employers. In effect, it penalizes employers for putting someone on the payroll in Chicago. It penalizes them for expanding operations in the city. Add in the city’s notorious regulatory red-tape and the council’s penchant for punishing those who hire nonunion labor, and you have a city that encourages businesses to look elsewhere.

Daley has chosen to use TIF incentives to business rather than restructuring an egregious tax code. That’s another subject but addresses taxes that negatively effect the business climate here and employment opportunities is a much more direct way to incentive business. Kill the head tax and help Chicagoan’s get to work.

Kill the jobs tax — chicagotribune.com.