Chicago's Financial Destruction

It was a great city at one time. Now it is falling apart. From Meep at STUMP: Chicago Watch: Head Tax Hostages, Credit Ratings, and Reactions

While all the headlines are about the fight over Chicago Mayor Brandon Johnson's proposed "head tax," a tax on every employee at every business with more than 100 employees, the real story, to me, is the credit rating.

There is a saying in the bond market: credit ratings lag the market.

That is, we see the market’s assessment of credit risk before the credit rating agencies making a move.

That makes sense, as the market prices continuously (in basis point spreads over Treasuries), while the credit ratings are at discrete ratings.

11 Dec 2025, Chicago Sun-Times: Chicago’s bond rating likely to drop to a notch above junk, no matter how and when budget stalemate ends.

This is big, because Chicago is borrowing money to pay current debts. They are living off the credit card, and so the rates are going up.

That is, Chicago has to pay much higher interest rates on their bonds, the less creditworthy they are… just like individuals with poor credit scores.

As for the head tax, Chicago is facing $1.15 Billion (with a "B") deficit for 2026. They head tax - if all of the numbers work out in their favor would raise $100 million. But Brandon Johnson doesn't want to cut programs. In fact he wants to use that $100 million for new spending to combat violence in the city, and he doesn't want more police, because that would be racist, or something.

Mayor Brandon Wants to Die on Head Tax Hill

The first thing that will happen if the head tax is passed, is that companies with between 100 and 110 employees, will suddenly have 99 employees. They next thing that will happen is large companies who are considering moving out of the city will make the determination that it is time to go, and any companies that might be considering a move to Chicago will look elsewhere.

Not that I believe any company is considering a move TO Chicago at this time.

It really was a great city, and not that long ago. I loved living and working in the city. Taking the trains downtown to museums, and restaurants was great. If you don't count trips into or through O'Hare airport, it has been 2 decades since I've set foot in the city.