Chicago Mayoral Candidate Paul Vallas Is Being Bought by the Rich

With $1.6 million in his pocket from wealthy finance donors, Chicago mayoral candidate Paul Vallas is attacking his progressive opponent Brandon Johnson’s plan to fund public schools and city infrastructure by taxing financial transactions.

Chicago mayoral candidate Paul Vallas speaks during a press conference at his campaign headquarters on February 3, 2023 in Chicago, Illinois. (Scott Olson / Getty Images)

In the final stretch of Chicago’s closely watched mayoral race, candidate Paul Vallas is attacking his progressive opponent’s plan to fund public schools and infrastructure by taxing the wealthy — including a tax on financial trading that would hit some of Vallas’s top campaign donors.

The revenue plan proposed by Cook County commissioner Brandon Johnson includes what he calls a “Big Banks Securities and Speculation Tax,” which would levy a $1 or $2 charge on most trades. Johnson’s campaign estimates this financial transaction tax could raise as much as $100 million annually for the city.

Vallas opposed Johnson’s tax plan during a debate last week, arguing that raising taxes “is the absolute wrong approach to take,” and that Chicago’s next mayor should instead focus on reducing spending.

Johnson’s tax proposal would hit financial firms that profit from speculative trades, often conducted at the millisecond level. Executives at six such firms have contributed $1.6 million to Vallas’s bid, according to a Lever review of campaign finance records. That’s nearly 10 percent of Vallas’s total mayoral fundraising haul.

Among the firms that profit from speculative trading is the hedge fund giant Citadel, whose financial dealings were swept up in the 2021 Gamestop controversy. Citadel’s billionaire founder and CEO Ken Griffin has been a major funder of right-wing politicians like Florida governor Ron DeSantis and former Illinois governor Bruce Rauner.

Earlier this month, Griffin endorsed Vallas, telling Bloomberg News, “I really admire my colleagues who have supported Paul Vallas publicly with their voice and with their money.”

Johnson’s financial transaction tax plan mirrors those proposed by progressives at the state and federal levels. Griffin is on record opposing the idea, claiming during a 2021 congressional hearing that a national financial transaction tax would “injure Americans hoping to save for retirement.”

Ten Citadel executives have contributed a total of $762,000 to Vallas, a former Chicago Public Schools chief who helped Wall Street firms extract more than $1 billion in additional interest payments from the school district during his tenure, as the Lever reported last week.

Johnson is a former social studies teacher endorsed by the Chicago Teachers Union, which has denounced Griffin’s past interventions in local politics and support for mass school closings.

Vallas has additionally received donations from executives at Calamos Investments, the Chicago Trading Company, Cognitive Capital, Consolidated Trading, and DRW Holdings — firms that also profit from speculative trades.

Some of the largest US financial exchanges are based in Chicago, including the Chicago Board Options Exchange and the Chicago Mercantile Exchange.

Critics of the proposed financial transaction tax say that it could drive some financial firms out of Chicago. Given the robust connections between financialization and inequality, and the relatively small number of good jobs created by the financial sector, it’s unclear whether the departure of the industry would be a net negative for the city.

On the other hand, the passage of a financial transaction tax in Chicago or in Illinois could buttress efforts to pass such policies in New York — which had a stock transfer tax for most of the twentieth century — and New Jersey.

“Enough of Illinois”

The bestselling 2014 book Flash Boys, authored by Michael Lewis, chronicles the world of high-frequency traders, who make enormous sums of money by running trades at the millisecond level, exploiting minor differences in prices to collect huge profits.

Citadel and its affiliated market making firm, Citadel Securities, have long been players in this arena. A 2013 CNN report showed Citadel employees executing twenty-one million trades in less than three minutes.

In January, Citadel was fined $10 million by South Korean regulators for violating the country’s securities laws while using its proprietary high-frequency trading algorithm.

Griffin moved Citadel from Chicago to Miami in 2021, telling Bloomberg this month that he’d “had enough of Illinois.” But the firm still maintains a significant presence in the city, and as an active high-frequency trader, the financial transaction tax championed by Johnson could cost Citadel enormously.

On January 23, when Johnson announced his financial transaction tax proposal, polls had begun to show a likely runoff between Johnson and Vallas in a then-crowded field of candidates. In Chicago’s municipal elections, if no candidate garners a majority in the first round of voting, the top two advance to a runoff.

That same day, Citadel executive Gerald Beeson contributed $100,000 to Vallas’s campaign, records show. Two days later, another Citadel executive gave $75,000. After Johnson and Vallas proceeded to a runoff, the cash pump was unleashed, with executives at companies connected to aggressive trading donating another $1 million to Vallas.

“Brandon Johnson wants to improve services like mental health and youth jobs programs by taxing speculative financial trading,” said Saqib Bhatti, coexecutive director of the Action Center on Race and the Economy, which backs the transaction tax. “It doesn’t surprise me that executives at firms that specialize in this risky trading would pour money into his opponent’s campaign.”

A Citadel spokesperson told the Lever, “We moved our HQ from Chicago to Miami last year, and with it the bulk of our investment professionals and trading activity takes place outside of Illinois.”

Citadel did not answer questions about the number of employees the firm maintains in Chicago, nor the estimated impact of Johnson’s proposed financial transaction tax on its business. In city election records, all but one of the donations to Vallas from Citadel executives list addresses in Illinois.

The Vallas campaign did not respond to a request for comment.

Protecting Retirees

Griffin, Citadel’s CEO, opposed the idea of a financial transaction tax in a 2021 congressional hearing on the video game retailer Gamestop and other “meme stocks.” Citadel was accused by retail investors of ordering stock trading firm Robinhood to stop executing trades in Gamestop as the stock was rising, threatening Citadel’s short positions.

In the hearing, held over Zoom, progressive representative Rashida Tlaib (D-MI) asked Griffin whether his firm’s trading algorithm is programmed to trade ahead of transactions by pension and retirement funds — and whether that increases costs for such funds.

Griffin replied that his firm has “generated exceptional returns for pension plans and for endowments.”

Tlaib noted that as a result of high-frequency trading, ordinary investors end up effectively paying a $5 billion tax each year.

“This means that Wall Street firms like yours engaging in high-frequency trades are actually making money at the expense of my residents’ retirement funds,” she said, before asking whether Citadel opposed a federal financial transaction tax.

“We firmly believe that a transaction tax will injure Americans hoping to save for retirement,” said Griffin.

Citadel has also been a member of the Coalition to Prevent the Taxing of Retirement Savings, a collection of stock exchanges and trading platforms that banded together in 2020 to defeat a proposed financial transaction tax in New Jersey.

The coalition opposed the idea nationally in 2021 when it was being floated by the Biden administration, telling CNN, “This approach has a long history of unintended consequences that will penalize workers, pensioners, and American families.”

Griffin has a history of spending big to oppose increases on his taxes: in 2020, he spent nearly $54 million to help defeat a constitutional amendment that would have allowed the state of Illinois to establish a progressive income tax, akin to income taxes on the federal level. Last year, ProPublica estimated that Griffin’s gamble could save him $51 million in taxes annually.

In the 2022 election cycle, Griffin spent nearly $75 million backing federal Republican candidates and committees, according to a Lever review of campaign finance data.

In the same March interview where Griffin praised Vallas, Griffin also endorsed a 2024 presidential run by DeSantis, saying, “I would love to see him run.” Griffin has donated nearly $11 million to DeSantis’s political committee, according to Florida records.

Current polls show a tight race between Vallas and Johnson. Chicago’s runoff election will take place April 4.