Chicago small business owner says mayor's proposed tax hike could add to growing costs

CHICAGO - After Mayor Brandon Johnson unveiled his budget proposal that looks to close an $882 million gap, some alders and small business owners are criticizing a plan that would raise taxes on businesses. 

Mayor Johnson's budget proposal

The backstory:

Joe Angelastri has been running his business at Six Corners since 1978. In 1988, he took over the space that currently houses the City Newsstand. In 2011, he added the City News Café to help supplement his income. He says the cost of doing business in Chicago has steadily increased, leaving him with less room to absorb additional expenses.

"Every year it gets a little bit harder," Angelastri told Fox Chicago. "It's incremental, but it's against business most of the time."

Angelastri says he began noticing the city's 15% PPLT on services such as Google Workspace and website expenses when he started reviewing his bills more closely.

"We paid $110 on the city tax alone," said Angelastri. 

Now, Mayor Johnson wants to raise the tax rate to 20% for many taxable leases and cloud services. The mayor's administration says the increase would generate an additional $234 million to help fund city operations. The proposal would keep the rate on vehicle leases at 15% and lower the rate on certain film production equipment leases to 11%.

Johnson defended his overall budget proposal by arguing that large corporations should contribute more toward city services.

"My 2027 budget ensures that every Chicagoan receives their fair share of the investments, services, and opportunities that define our city, funded by responsible spending cuts that protect essential services and by asking wealthy corporations to pay their fair share," Johnson said in his budget address.

But Alderman Gilbert Villegas, 36th Ward, says the cost of the PPLT does not necessarily stay with the large companies the mayor wants to target.

"At the end of the day, that cloud tax and PPLTE tax gets passed down. Microsoft, Google, they do not absorb that. They pass it down. And ultimately, it's going to be regular people," Villegas said in an interview on the Chicago Report.

Villegas pointed to everyday transactions he says can be subject to the tax, including renting tools, party equipment and tuxedos.

"When you go to Home Depot and rent tools, PPLT applies. You want to rent a bouncy house and chairs and tables, PPLT applies. You want rent a tuxedo, PPLT is taxed," Villegas said.

Angelastri says the challenge for small businesses is that they cannot simply increase revenue to keep pace with rising costs. 

"Our revenue is the same as it was in the year 2000," he said, explaining that his publication business has not experienced significant revenue growth over that period.

He also says Chicago business owners already face substantial property tax costs. Angelastri has five employees at his Chicago location and two at a location in Evanston.

The mayor's separate proposed head tax would charge businesses with more than 125 full-time employees $25 per employee each month. Angelastri's five-employee Chicago business would not meet that threshold, but he says the proposed PPLT increase could still affect his operating costs.

What's next:

Angelastri says he may consider handling some work through his Evanston location if doing so could legally reduce his tax burden.

"If they push us too hard, we'll try things like working out of the suburbs or something so we don't have to pay the taxes," he said.

Johnson's budget proposal must still be considered by the Chicago City Council, where the proposed business taxes face opposition from a group of aldermen. The debate will determine whether the tax increases move forward and how the city plans to close its projected budget gap.

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