Mayor Rahm Emanuel announced a new plan at the City Council meeting on Oct. 5 that would help eliminate the Chicago Employer’s Expense Tax—also known as the city’s “head tax”—which prevents many medium and small businesses from starting and growing.

The proposal would accommodate a pledge Emanuel made during his mayoral campaign that would rid Chicago of a tax that requires businesses to pay an additional $4 a year per worker if the company has 50 or more employees.

“I pledged a dollar a year for four years during the campaign,” he said. “So, I’m ahead of the game.”

According to Emanuel, the ordinance would reduce the head tax to $2 by July 2012, then eliminate the tax altogether by July 2014. He also said the plan will be part of the 2012 budget.

During the meeting, several aldermen praised Emanuel with support and applauded him for taking action against a tax that hinders businesses from creating jobs.

Alderman Margaret Laurino (39th Ward) stood up to applaud Emanuel for his initiative in eliminating the head tax.

“I’m delighted to hear that we are moving in this direction,” Laurino said. “And I think this clearly sends a message to the existing businesses and potentially the new businesses.”

Most support came from aldermen Brendan Reilly (42nd Ward) and Tom Tunney (44th Ward), both of whom proposed a four-year plan two years ago that would have tried to eliminate the head tax; however, former mayor Richard M. Daley rejected the idea.

“The head tax is a job killer; it is a sign on the highway saying, ‘Please, please, do not invest in the city of Chicago,’” Reilly said. “So thank you for finally doing away with this regressive tax that scares away employers and opportunities for the people of Chicago.”

Tunney said he was very excited to see the ordinance’s ability to relieve the burden that is currently placed on employers, and this has been one of the most aggressive taxes imposed on employers.

“We also have a train wreck happening when we have to combine mandated health care and jobs by 2014. And people wonder why we’re not adding full-time jobs to the work force,” Tunney said. “There is so much coming ahead that employers are very nervous about adding full-time equivalents. So they’re playing the games of contractual employees, part-time employees and seasonal.”

Presently, the 2,700 Chicago companies that are obligated to pay the head tax contributed $35 million in revenue from 2009–2010.

Emanuel said over time, the $20 million in annual revenue would be returned back to the taxed businesses.

As a result, it will allow them to hire more workers and purchase new supplies, which would increase consumer production. This would help alleviate the city’s 10 percent unemployment rate—which is one of the highest in the country.

“Eliminating the head tax is the right thing to do for businesses, big and small, and it’s the right thing to do to secure Chicago’s future,” Emanuel said.