Sometimes the golden goose escapes the knife and moves to Florida. Among the tax proposals (increases, not cuts, in case you were wondering) being put forward by Brandon Johnson, Chicago’s new mayor, is one for a financial-transactions tax, at a rate of $1 or $2 for every “securities trading contract”.
The Illinois Policy Institute has taken a look at this idea, and argues that it is not one that is within the city’s power to levy:
This proposal could drive the entire sector to pick up and leave, as they have threatened before. However, this tax appears to be prohibited by state law. 35 ILCS 820/2 reads: “…home rule units shall not have the power to levy any tax on stock commodity or options transactions.” To implement this proposed tax, Johnson would need the General Assembly to send the governor a bill to repeal the law, and Pritzker would have to sign it. And because Pritzker has publicly expressed doubts about the tax, getting such a law through could be tough.
Such taxes are not a good idea at the best of times, but to propose them for the embattled city that still hosts the Chicago Mercantile Exchange, well . . .
How does that advice about stopping digging go again?
Click on the link to the Wikipedia entry for the CME given above for details of what’s traded there. Here’s one detail that might catch your attention:
Trading is conducted in two methods; an open outcry format and the CME Globex Trading System which is an electronic trading platform. More than 90 percent of total volume at the exchange occurs electronically on CME Globex.
For an idea of what an “open outcry format” looks like, there has never been a better place to turn to than the dignified portrait contained in that great Christmas movie, Trading Places.
But then note that second sentence:
More than 90 percent of total volume at the exchange occurs electronically on CME Globex.
What’s traded electronically can be traded anywhere.
CME Group Inc. is prepared to leave Chicago if the city and state take steps that are perceived as “ill-conceived,” Chief Executive Officer Terry Duffy said in an interview. . . . Duffy’s remarks may add pressure on a new mayor who’s promised a slate of progressive reforms, as he contends with a recent exodus of financial firms from one of America’s best-known trading hubs. Citadel founder Ken Griffin last year announced he was ditching Chicago for the sunlit uplands of Miami, while other trading companies are grappling with empty office buildings.
Duffy then twists the knife:
“We have sold all of our property in the state of Illinois, in the city of Chicago,” Duffy said. “We don’t own anything any longer.
“In our leases, we have a language in there that says if there’s something that’s ill-conceived from the city or the state, that our leases are null and void,” Duffy said. “We’re in a very strong position. If we had to leave, we could leave.”
Oh.
Like the CME itself, Duffy’s name has become synonymous with Chicago and his origin story growing up in the city’s blue-collar South Side is an often-repeated one. He’s since grown the CME into the world’s biggest derivatives market, snapping up rivals and creating a trading empire that spans everything from Treasury futures to cattle contracts and stock options.
“We like Chicago,” Duffy said. “We have options coming up on our long-term leases already. So that doesn’t mean we’re leaving.”
The third-largest US city has been struggling with rising crime that sparked outrage among residents and business leaders. Griffin cited violence and state taxes as reasons for moving his Citadel hedge fund to Miami, while Duffy recently said his wife had been carjacked in the city.
And yet, says Duffy, “Chicago’s been on its back foot before and it can get back on its front foot, but it takes all of us to do so. . . . So I want to be a part of the solution, not a part of the problem.”
Does Chicago’s mayor?