The mayor introduced a measure to the city council this week that will cut the head tax in half next year and do away with it by 2014.
If a company in Chicago employs more than 50 people, it has to pay four dollars a month for every employee. Mayor Rahm Emanuel calls this head tax a "job killer."
He says cutting the head tax has already made Chicago more attractive to businesses such as Ford - which recently announced it wants to add jobs to its South Side plant.
"This has been a significant piece in our ability to win those jobs at that Ford plant and add a third shift in the Ford plant in the city of Chicago," he said.
Eliminating the head tax will drop the city's annual revenue by $23 million. His administration said in a press release that the lost revenue will be offset by other reductions in the 2012 budget. The mayor will present his full budget proposal next week.