Chicago’s Tax Changes Drive Trading Firms Away, Impacting the City
Chicago, the third most populous city in the United States, is located in the financial district known as the Loop. It serves as a major center for American transportation, culture, politics, education, and finance. Chicago is often referred to as the economic and cultural capital of the Midwest in the United States. The city is home to some of the world’s largest derivatives trading companies, especially in futures and options trading. These companies, engaged in derivatives trading, have an annual turnover of approximately $300 billion (around 83.3 lakh crore rupees), which is substantial but forms only a small part of India’s overall economy. Moreover, the city’s financial industry provides employment to thousands of people, adding to its significance.
However, recently, these companies have faced a new proposal by the city’s new mayor to impose a tax of $800 million (6,600 crore rupees) on them. The city is facing financial difficulties due to increased spending, primarily driven by rising homelessness. Officials estimate a budget deficit of 4,500 crore rupees in the coming year. One proposal is to impose this tax on financial transactions, which has led many companies to consider leaving the city.
On one hand, the financial firms are already under pressure due to increasing crimes in the city. The top executives of these companies have decided that if the crime graph continues to rise in the city and new taxes are imposed on companies, they may consider leaving the city.
However, this decision is not final, and discussions have been initiated with the mayor and other policy makers. Mayor Lori Lightfoot has not made a final decision on the method of imposing the tax. Her top advisor, Jason Lee, stated that Chicago’s economy is diverse, and they are fortunate not to be dependent on any single industry. When the CEO of CBOE Global Markets, Ed Tilly, was asked if they were demanding to leave the city, he stated that they are not demanding to leave the city but are compelled to consider it due to circumstances.
Chicago’s Derivatives Industry: A Legacy of Over 200 Years
The origins of Chicago’s derivatives industry can be traced back to the early 1800s when the Chicago Board of Trade initiated futures and options trading. Over time, it has evolved into the Chicago Mercantile Exchange (CME) as it is known today, with several key players like CME Group, CBOE, CME, and CBOT actively engaged in derivative trading. The derivative industry in Illinois provides employment to approximately 58,800 people, with a recent 19% growth in employment within the derivative industry sector, while the state experienced an overall unemployment rate increase of 5.9% during the same period.
