Chicago is on pace to collect $49.2 million during the first year of Mayor Brandon Johnson’s groundbreaking tax on social media companies — nearly 60% above the city’s original estimate — raising the stakes for a court challenge by Big Tech.
The City Council’s Finance Committee was informed of the potential windfall Monday as it refined the definition of the tax in an apparent attempt to strengthen the city’s case, and better coincide with the state’s version of the tax.
The social media tax — at a rate of 50 cents per user after the first 100,000 users — was expected to raise $31 million during all of 2026.
But Johnson’s policy chief, Jung Yoon, told the Finance Committee that the city has collected $16.4 million during the first four months alone from the ten social media companies to which the levy has applied. They are: Meta, owner of Instagram, Facebook and Threads; YouTube; X; Snap; TikTok; LinkedIn; Reddit; Twitch; Pinterest and NextDoor.
At that rate, the first-year take would be $49.2 million, 58.7% higher than anticipated.
“I’m surprised that it’s doing so well,” Finance Chair Pat Dowell (3rd) told the Sun-Times. “This is like the first time we’re ever seeing a tax like this. I don’t think anybody really knew what it could generate. And it is performing well above expectations… That bodes well for the city.”
A coalition of the world’s largest tech companies is seeking to overturn the tax on grounds that the first-of-its-kind per-user levy tramples over the First Amendment rights of major corporations that contend they’re part of the free press.
The Circuit Court lawsuit was filed in mid-March by the tech trade group NetChoice and is in the early stages of discovery, the Finance Committee was told.
Ald. Nicole Lee (11th) said the apparent windfall from the social media tax could leave the city with a giant hole when it comes to bankrolling future mental health programs.
“It is a gamble. The administration has to understand that,” Lee said. “My fear is a net loss on this one if we don’t succeed in winning this lawsuit… I hope we don’t lose it. But I don’t think it’s an unfounded fear.”
Former Finance Chair Scott Waguespack (32nd) said the social media tax is “easy to collect,” but it’ll be “harder to give the money back.”
“We could have a big hole a year after, or two years after, when the courts potentially say you don’t have standing, you lose the case. Then we have to go find… what could be $100 million-plus,” Waguespack said.
For now, the higher-than-expected revenues are being held in escrow — what Dowell calls a “lock-box” — pending the outcome of the legal challenge. In the meantime, those social programs are being bankrolled by the city’s corporate fund.
“It just means we can’t expand these programs” if we lose the legal challenge, Dowell said.
In an apparent attempt to strengthen the city’s case and match legal definitions included in the state’s version of the social media tax, the Finance Committee approved Johnson’s plan to “clarify definitions” in the city tax as well as the law’s “original intent.”
One of the refined definitions makes it clear that “social media means a website, platform or other application where users provide the content.”
“This is in contrast to platforms, websites or applications where the content is created or selected for inclusion by those who maintain the website platform and not the users themselves. So, think about like the Washington Post or other [news] websites like that,” Yung told the Finance Committee.
“It removes from the definition of social media any reference to bona fide news websites, applications or internet platforms,” Yung said, adding “that was not necessary in inclusion of the definition because those websites do not fall under the definition of social media under the law.”
Yet another change would clarify which uses count towards the tax.
“It is clarifies that it’s applicable where there is a use by a Chicago consumer during a calendar month, even if the platform had previously collected data on that consumer, they have to be actively using it for that month to count towards the tax,” Yoon said.
Dowell called the changes “a common sense vote,” adding, “You have to be a social media company. We shouldn’t be taxing the Tribune… or Sun-Times.”
A subject matter hearing on the sale of Chicago parking meters to a New York investment firm was postponed until June 25 to give Finance Committee members time to review more than 700 pages of documents provided by the New York firm, Stonepeak Partners, on Friday evening.
Dowell credited Stonepeak with being “very forthright with information” that her colleagues needed more time to review.