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Trib praises Cullerton as Hell’s temperature begins to drop

Wednesday, Mar 9, 2011

* Miracle upon miracles, the Tribune editorial page actually praised Senate President Cullerton today

John Cullerton, president of the Illinois Senate, committed a dreadful sin Monday. During a speech that could have been titled “State Finance 101,” the Chicago Democrat briefly mentioned that if Illinois taxed retirement income, Springfield would collect some $1.6 billion a year.

Can you believe that? A politician dared to mention taxing a powerful voting bloc! The lecture Cullerton wasn’t delivering Monday, “Politics 101,” dictates that talk of taxing seniors is verboten.

The accompanying photo wasn’t exactly flattering…

Oof. He looks like an unsober fop in that pic. Let’s avoid captions, please. Wouldn’t be fair. And I don’t have time to police them.

* Regardless of that photo, it’s hard to disagree with their conclusion…

Sen. Cullerton, you have a good point. Illinois needs a talk about revising tax policies and rethinking exemptions. Not to grab more from taxpayers, but to broaden the tax base as a matter of fairness. Why should the working family making $50,000 a year pay a tax that the retiree getting $100,000 a year avoids? Credit Cullerton for thinking creatively — and out loud.

I was just on the phone with former Gov. Jim Thompson talking about all the big bills that have been passed during the past few months. Subscribers will see more, but one of the things Thompson emphasized is that we need to broaden the tax base. He was mostly talking about the sales tax. The problem with a narrow, outdated taxing base, he said, is that rates have to be raised on an ever-smaller pot of available money. It makes no sense. Expand the base and then significantly lower overall rates is the better way to go. I’d prefer, however, (and I believe Thompson does as well) that they stick to expanding the base on sales taxes and not mess with the income tax, but it’s the same basic point. Expand the base and lower rates.

The problem with this particular Cullerton idea is that expanding the base will not lower rates if it’s just confined to seniors making over $100K a year. That only brings in $70 million a year. It’s best just to drop it.

* The Sun-Times makes many of the same points today

But the noise should not drown out an important conversation about tax reform. Illinois desperately needs to update its tax system so it is based on ability to pay and targets taxes where the economy is expanding — among the wealthiest, not the poorest. Illinois’ current tax system, anchored by a flat income tax and a narrow sales tax base, disproportionately hits our poorest residents.

Gov. Quinn wants to create a commission to look at ways to update the tax system. We’re all for it, though several good proposals are already well-known. These include changing the state Constitution to allow for a graduated income tax, expanding the sales tax base to reflect our modern service economy (an idea Chicago Mayor-elect Rahm Emanuel supports) and, potentially, taxing some retirement income.

Quinn should’ve appointed that commission a year ago. He’s a bit late now, after raising income tax rates by two points.

The other thing Thompson and I discussed is my belief that it’ll be at least a generation before the citizenry stops being infuriated at this latest tax hike. He agreed. In my own opinion, it was done the wrong way, in every way. The money is needed, to be sure, but this thing is a political disaster.

Discuss.

…Adding… Related…

* Hines: Cullerton not all wrong in pension tax proposal

- Posted by Rich Miller        


34 Comments
  1. - 47th Ward - Wednesday, Mar 9, 11 @ 11:22 am:

    I don’t know Rich. A generation is a long time, long enough for another hike in the tax at some point. I think most voters will use the next two election cycles to make a strong statement about the latest income tax hike, and then it will be done.

    But I’m often wrong.


  2. - Rich Miller - Wednesday, Mar 9, 11 @ 11:25 am:

    ===A generation is a long time, long enough for another hike in the tax at some point. ===

    Two points…

    1) People still complain about the Lottery.

    2) It’s been more than a generation since the last income tax hike.


  3. - Bill - Wednesday, Mar 9, 11 @ 11:28 am:

    Not one legislator who ran for re-election after voting for the last tax increase lost.


  4. - Rich Miller - Wednesday, Mar 9, 11 @ 11:30 am:

    Bill, that was a bipartisan tax hike passed on a structured roll call signed by a Republican governor and supported by his GOP successor. Apples and oranges. Actually, apples and crepes.


  5. - D.P. Gumby - Wednesday, Mar 9, 11 @ 11:31 am:

    I don’t think anyone but the foamers & no-taxers will be ranting once the economy improves. Most people are fed up w/ the inequality in the system and the archaic nature–esp. property taxes for schools–almost to the point of support for a VAT if everything else was scrapped. It’s getting to be a “Fine, take my money, but stop making me suffer while you take it!”


  6. - just sayin' - Wednesday, Mar 9, 11 @ 11:49 am:

    The Dems could pass human sacrifice and the IL GOP would still blow it.

    I don’t see the energy out there for rewarding Republicans for having no plan.


  7. - Responsa - Wednesday, Mar 9, 11 @ 11:52 am:

    ==I don’t think anyone but the foamers & no-taxers will be ranting once the economy improves.==

    OK, that was a joke, right?


  8. - Langhorne - Wednesday, Mar 9, 11 @ 11:55 am:

    gov thompson is right about expanding the sales tax base and has held this position for years. we tax fewer categories under the sales tax than most states. i was at a luncheon with him in the waning days of his governorship and asked him if he had a magic wand and could enact any bill, what would it be. he said expand the sales tax base.


  9. - Captain Angrypants - Wednesday, Mar 9, 11 @ 12:01 pm:

    There’s anger and grumbling about the income tax hike, sure, but the state hasn’t erupted in WI-style capitol protests as a result. Personally, I’m really glad a politician stood up for a tax increase, albeit a temporary one. As has been pointed out here, IL’s tax rates still compare very favorably to it’s neighbors. It’s long past time we were able to have a discussion that doesn’t start with “Any thought of a tax increase is off the table.”


  10. - Rich Miller - Wednesday, Mar 9, 11 @ 12:06 pm:

    ===but the state hasn’t erupted in WI-style capitol protests as a result.===

    That, to me, is not a valid measuring stick. People get angry in different ways, and one of them is to wait for the next election.


  11. - reformer - Wednesday, Mar 9, 11 @ 12:14 pm:

    Every previous income tax hike was bipartisan. This one wasn’t. Under the circumstances, what would have been a better way to enact it? None of Madigan’s targets voted for it, and he draws the new map.


  12. - Rich Miller - Wednesday, Mar 9, 11 @ 12:15 pm:

    ===None of Madigan’s targets voted for it===

    Several folks weren’t targets in the past, but will be now.


  13. - wordslinger - Wednesday, Mar 9, 11 @ 12:23 pm:

    I wouldn’t be surprised to see the state hook up with Emanuel in the next couple years on expansion of sales tax to “luxury” services — limos, elective plastic surgery, nail salons, plus some professional services.

    Was Big Jim cool with taxing legal fees?

    Still, I think there has to be some real heavy lifting on state healthcare costs and pension liability (if possible) before people would go for anything broad.


  14. - Sue - Wednesday, Mar 9, 11 @ 12:37 pm:

    If they expand the tax base by inclusion of retirement income maybe(just maybe) the increase to 5 percent could be temporary as was advertised


  15. - washedmyhands - Wednesday, Mar 9, 11 @ 12:41 pm:

    A suggestion - to keep the pension system afloat - there should be sunset legislation (expires in 5 years) and a graduated pension tax with all proceeds paying for pensions. $30K-$40K starts at .5%. $40 - $50K 1%. $50K - $75K 2%. $75K-$99K 3%. Over $100K ought to be taxed at 5% $125K and up 10%.


  16. - Cook County Commoner - Wednesday, Mar 9, 11 @ 12:50 pm:

    if you want pickets in Springfield, try pulling education out of the property tax. That’ll get you some serious teachers’ union pushback. Cullerton’s thoughts were moderate. No real reform will occur until the property tax is on the table also.


  17. - Captain Angrypants - Wednesday, Mar 9, 11 @ 1:15 pm:

    Rich, perhaps, but given the doomsday scenarios that the other side keeps saying are just over the hill should anyone dare try to raise taxes, it’s nice to know that you can, in fact, raise taxes without having the democratic process explode.


  18. - maddem - Wednesday, Mar 9, 11 @ 1:16 pm:

    OK so lets make a deal. Tax all pensions, except social security (I think FICA contributions were taxed by the state when earned). The money collected from taxing state and local government pensions goes back into the pension system or is used to pay for retiree health insurance. (Is there a breakdown on how much of the pension money is pubic and how much is private?) This is like the federal tax on social security benefits going into the Medicare Trust Fund. Also tax my deferred comp account. That money wasn’t taxed going in by the state, and isn’t taxed coming out. Is private 401(k) money subject to state income tax when earned?


  19. - Mark - Wednesday, Mar 9, 11 @ 1:19 pm:

    Rather than reform the teacher/administrator TRS pension system, Cullerton tosses out a trial balloon to tax all retirement income. The teachers have a union and union dues, the seniors don’t. The problems of TRS go much deeper than the State not making its mandatory contribution. The calculation of that contribution is flawed and burdensome.


  20. - Louis G. Atsaves - Wednesday, Mar 9, 11 @ 1:20 pm:

    The problem with the last round of tax increases is that they will be felt for quite some time. Besides adding to the weekly bite to the salary, those expecting refunds after filing tax returns may be forced to write checks instead.

    Nice to see someone finally say that the last second lame duck midnight tax increase “was done all wrong.”


  21. - Nick Name - Wednesday, Mar 9, 11 @ 1:57 pm:

    There is that “fairness” word again when refering to taxes. I have a feeling that everyone has a different opinion of “fairness”.


  22. - Kasich Walker, Jr. - Wednesday, Mar 9, 11 @ 1:57 pm:

    Get back the $700 billion for the 2008 Wall Street bank bailout and give IL 4.1%.


  23. - Bemused - Wednesday, Mar 9, 11 @ 2:55 pm:

    The Feds tax pensions. I am surprised the state does not.


  24. - Angry Chicagoan - Wednesday, Mar 9, 11 @ 3:15 pm:

    I still prefer Rahm’s approach of broadening the sales tax and lowering the sales tax rates. It shifts the burden of the sales tax up the income ladder and it ensures that sales tax revenues won’t constantly lose their value as people shift more and more spending from goods to services. I can certainly see a place for taxing some retirement income but in the grand scheme of things with taxing retirement income you either have to settle for a relatively small amount of money or risk ruining peoples’ retirement. At some point Illinois is going to need to think more broadly about revenue, up to and including a constitutional amendment to open up the possibility of progressive income taxes.

    But for both political and moral reasons, connected to one another, the state first has to get its financial house in order to the best of its ability under the current system — to restore public trust and to identify the problems that are truly intractable without deeper reform.


  25. - Angry Chicagoan - Wednesday, Mar 9, 11 @ 3:16 pm:

    I’d add that I think the pension income tax may well be appropriate given Illinois’ legal limitations; it’s just that no-one can realistically expect it to be a magic bullet that single-handedly solves the state’s problems.


  26. - Anonymous - Wednesday, Mar 9, 11 @ 3:24 pm:

    If I am reading many of these posts correctly (which I hope I am not), many of you think Cullerton was talking only about government pensions? I am sure he meant ANYONE with pension income over $100,000 per year.


  27. - piling on - Wednesday, Mar 9, 11 @ 3:50 pm:

    Mark,
    If you heard Cullerton’s speech to the City Club you’d know that significant changes to TRS and who pays for it were actually discussed in the speech. Taxing retirement income was not. It was part of a discussion with the media after the fact.


  28. - Jellybean - Wednesday, Mar 9, 11 @ 4:37 pm:

    Anyone with retirement income over $100,000 can afford to share some of it with the state. If teens in foster care can pay income tax on their minimum wage jobs, why not affluent retirees.


  29. - someonehastosayit - Wednesday, Mar 9, 11 @ 4:56 pm:

    Too bad we can’t have a Constitutional Convention to address all the changes needed in Illinois government. Oh wait…we had that chance and passed it up. We prefer to make it up as we go.


  30. - Vibes - Wednesday, Mar 9, 11 @ 4:58 pm:

    Michael Bauer is everywhere.


  31. - jake - Wednesday, Mar 9, 11 @ 6:58 pm:

    Naomi Jakobsson has filed an amendment to the state constitution to permit the legislature to enact a graduated personal income tax. Don’t know what the chances are this session, but it is a start. It is HJRCA0012, synopsis:

    “Proposes to amend the Revenue Article of the Illinois Constitution. Provides that individual income taxes may be at a graduated or a non-graduated rate. Provides that any such tax imposed on corporations shall be at a non-graduated rate, not to exceed the average of the lowest and highest individual rates by more than a ratio of 8 to 5. Effective upon being declared adopted.”


  32. - wordslinger - Wednesday, Mar 9, 11 @ 8:18 pm:

    See you, Vince. Enjoy Florida, but try to get to Denny’s before 4 p.m. — otherwise the lines are murder. And such small portions…

    If it turns out they have taxes in Florida, too, try Somalia. I hear there’s little taxation or government regulation for high-flying, pioneering entrepreneurs like yourself.


  33. - Michelle Flaherty - Wednesday, Mar 9, 11 @ 8:26 pm:

    Vince,
    The emergency budget act included near 5 percent pay cuts for lawmakers and cut mileage rates and session expenses.
    It’s been in the news and everything. Some lawmakers voluntarily doubled the amount.
    Please try to pay attention.


  34. - Capitol View - Wednesday, Mar 9, 11 @ 9:21 pm:

    I’m recently retired, but fully support taxing senior pensions above the $50 - 75,000 level. And yes, I would pay state income taxes at either level, based on my pension and my share of my late wife’s.

    Seniors get services — we have a whole IL Department on Aging to address some of their needs.Many other state agencies, ranging from Veterans Affairs to DHS to IDOT, provide services or subsidies to vulnerable seniors.


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