85 Comments - Dan Johnson - Thursday, Nov 1, 18 @ 9:41 am: Taxing retirement income sure would be a smart way to fill a bunch of that gap. It’s at least a billion a year. Approaching two, as I recall. That will certainly grow over time. - Me Again - Thursday, Nov 1, 18 @ 9:42 am: The chickens are coming home to roost. Pay up. - Texas Red - Thursday, Nov 1, 18 @ 9:45 am: happening all over…. https://www.dailyherald.com/news/20181031/suburban-actuary-who-calculated-pension-contributions-often-too-low-suspended-for-2-years - Lucky Pierre - Thursday, Nov 1, 18 @ 9:46 am: The unsustainable pension crisis that has left the state and far too many cities in Illinois on the verge of bankruptcyhas been ignored by Speaker Madigan for Rauner’s entire term Once again putting holding on to power and politics over solving the problems in Illinois - Perrid - Thursday, Nov 1, 18 @ 9:47 am: @Me Again, you realize that you, your neighbors, your community and the entire state are the ones that will be paying this, right? I’m all for the state paying what it has promised, but taking glee in the carnage and being a bit of a jerk about it isn’t particularly helpful, for anyone. - A guy - Thursday, Nov 1, 18 @ 9:48 am: In a perfect world, JB could cover this one and just report the transfer… - Oswego Willy - Thursday, Nov 1, 18 @ 9:48 am: Pritzker… Rauner… This issue isn’t going away until it’s addressed without interruption. This next term of a governor… not much good news with fiscal restraints front and center - VanillaMan - Thursday, Nov 1, 18 @ 9:54 am: This is a problem that time takes care of within the next twenty years. In the meantime, don’t screw up by delaying debt payments. - ChicagoVinny - Thursday, Nov 1, 18 @ 9:54 am: There goes the legal weed money /s - RNUG - Thursday, Nov 1, 18 @ 9:55 am: Part rules changes in reporting, part the Edgar Ramp. Mostly already known and predictable. Nothing really new here,but they have to make it sound like news. - RNUG - Thursday, Nov 1, 18 @ 10:02 am: == This issue isn’t going away until it’s addressed without interruption. == Be more accurate to say it isn’t going away for the next 27 years or so unless they find some magic beans to pay it off. And don’t expect the two proposed consideration bills to make a significant dent in the debt. Anyone who can run a current value spreadsheet will pass on the deals being offered. - Oswego Willy - Thursday, Nov 1, 18 @ 10:03 am: ===…it isn’t going away for the next 27 years or so unless they find some magic beans to pay it off.=== I defer to your preciseness. - Sue - Thursday, Nov 1, 18 @ 10:06 am: TRS’ definition of a good investment return differs then most. The alternatives(hedge fund)allocation is out of whack and is reducing the performance. 8 percent in a year when similar large public funds did 10 plus isn’t a good year - Perrid - Thursday, Nov 1, 18 @ 10:12 am: @Sue, when you’re planning for 7%, and you get 8%, it’s good. They made more money than they were assuming they were going to make, at least for this one year. Sure, more is better, but they aren’t competing against the market. Though I will agree they don’t seem to be getting their money’s worth from the riskier investments. But again, saying something could be better, and saying that it is bad, is two different things. - JohnTwig - Thursday, Nov 1, 18 @ 10:14 am: Paying the pension debt. As a 25 year retiree under both TRS and SURS, I would be most happy to have my pension taxed by the State under a well-planed progressive income tax system. I already have one child – laid off from a SURS school two years ago after 6 years employment – who decided to move out of Illinois and now is employed at Purdue University. I strongly believe that fairly taxing my retirement pension is much preferable to either defaulting on the debt or passing it on — with interest — to my grandchildren. John Terwilliger - SSL - Thursday, Nov 1, 18 @ 10:22 am: The nice thing about this situation is there is an opt out clause. To do this, simply move out of the state and you won’t need to contribute to the ever increasing pension payments. Be forewarned that if you exercise the opt out clause, you will be robbed of the charming winters we enjoy in this state, not to mention the crumbling infrastructure. - Anonymous - Thursday, Nov 1, 18 @ 10:32 am: And the underfunding came at urging of teacher unions, who wanted the money put into State Aid to Education, which would increase salaries, and, not coincidentally, pensions. - City Zen - Thursday, Nov 1, 18 @ 10:35 am: ==This is a problem that time takes care of within the next twenty years.== …I’m not a pension doctor, although I play one on this blog. No worries, the state is already required to contribute an extra $300 million to education funding. Oh wait, pension funding isn’t considered education funding, even though it’s part of the compensation package for our educators. Better luck next ramp… - Sue - Thursday, Nov 1, 18 @ 10:40 am: Perrid- you are totally wrong. Hitting the hurdle rate in a strong investment year is bad performance. Need to look at the pension universe of large funds. When you are not in the top quartile- you need to ask what in the heck are they doing - Demoralized - Thursday, Nov 1, 18 @ 10:48 am: ==has been ignored by Speaker Madigan == It hasn’t been ignored by Speaker Madigan. Ever hear of Tier II? Here’s hoping that if Rauner loses you might stop whining day in and day out. - Demoralized - Thursday, Nov 1, 18 @ 10:51 am: ==but taking glee in the carnage== I agree. And that goes for those taking glee in trying to strip employees of what they are owed. There’s no glee to be had on either side. - JS Mill - Thursday, Nov 1, 18 @ 10:55 am: More interesting in the TRS report is what the year-to-year payment is. TRS would cost $1.2 billion without all of the debt. All other things being the same that is $3.6 billion extra dollars in the budget just from TRS. This is the fiscal mismanagement created by generations of governors and legislatures. Why? Because everyone wants something but no one wants to pay for it. Shrieking nitwits that pop up everytime taxes are discussed are part and parcel of the problem. The bills have to be paid. - NeverPoliticallyCorrect - Thursday, Nov 1, 18 @ 11:04 am: While I am not retired yet I am close enough to be thinking about this. The attitude of go ahead and tax my retirement income doesn’t ring honest with me when it’s from someone whose benefits have contributed to the problem we find ourselves in here in Illinois. Most of us don’t have inflated state retirement plans and we also resent the idea that we are paying for benefits that many think were never fair in the first place. So how about this, go ahead and donate some of your retirement income to Illinois and leave those of us who are living off less alone. - Nieva - Thursday, Nov 1, 18 @ 11:07 am: So tax our pensions and raise 2 billion. I am confident it will all go to pay down the pension debt… - Anotherretiree - Thursday, Nov 1, 18 @ 11:12 am: The 2020 recession will blow a bigly hole in the state budget on top of accelerating pension contributions. Next governor will need lots of antacid… - Ole' Nelson - Thursday, Nov 1, 18 @ 11:25 am: NeverPoliticallyCorrect “we also resent the idea that we are paying for benefits that many think were never fair in the first place.” What would civilization look like if we only had to pay for government costs that we thought “were fair” Would people stop paying property taxes once the kids finished school? No taxes go to medicaid for those that think everyone should pull themselves up by their bootstraps? Seems like it would be really complicated. Our system isn’t perfect, but citizens elected those politicians that promised a level of benefits that they were unwilling to fully fund on an annual basis. I am sure that most taxpayers could list many things that taxes go to that they don’t like or feel is “unfair”. Do you see any downside to the State of Illinois suddenly deciding to renege on decades old promises to people who have dedicated their working years to earn those benefits? - DuPage - Thursday, Nov 1, 18 @ 11:25 am: Pay the pension funds first. Then pay the other bills. - City Zen - Thursday, Nov 1, 18 @ 11:32 am: ==TRS would cost $1.2 billion without all of the debt.== It would be less than that. In order for there to be no debt, salaries from which pensions are calculated would have been lower because that money would’ve gone into pension payments instead. Plus many pension enhancements would never have been implemented. That, along with tax increases, was needed for zero pension debt. But it’s there and it has to be paid. Pay pensions first and fund education with whatever is left. - Anonymous - Thursday, Nov 1, 18 @ 11:36 am: While outrageous pensions are touted as pensions everyone receives, I for one, do not. Not every public pensioner receives so much that taking some away wouldn’t hurt. If the average pension for a TRS recipient is somewhere in the 40s with no social security, I refuse to accept that as extravagant. For the person who is willing to pay tax on his TRS, why not just skip receiving any at all, or donate back 50% into the fund. Many legislators decline their pensions, some even refuse a salary. You can too. But don’t speak for others who get more of an average payout. - Anonymous - Thursday, Nov 1, 18 @ 11:42 am: I’m married to a former teacher who left the profession in part because of the mess TRS is in. Teachers held up their end of the bargain and made their contributions. The state failed them in a spectacularly bipartisan fashion. Their unions failed them by gleefully endorsing and supporting politicians on both sides of the aisle who never had the best interests of TRS in mind. It’s sickening that this would happen to people who give so much of themselves to try to shape our future. - anon2 - Thursday, Nov 1, 18 @ 11:46 am: === Taxing retirement income sure would be a smart way to fill a bunch of that gap.=== As usual, Dan prescribes good policy. It’s not politically feasible, however, given the huge proportion of the primary electorate that is over 50. His proposal would have wider support if it applied only on households with more than $100,000 in pensions and other exempted retirement income. - Sue - Thursday, Nov 1, 18 @ 11:51 am: I love it every time someone says that the teachers held up their part of the bargain. Truth be told very few TRS participants pay a dime out of their own pockets. The Employer pick up is pretty universal throughout the State. The school districts pay the teacher portion thru CBA agreements. So it’s the taxpayer who is paying 100 percent for virtually every TRS member - Demoralized - Thursday, Nov 1, 18 @ 12:05 pm: == every time someone says that the teachers held up their part of the bargain== They have. That’s the benefit they signed up for when they took the job. ==So it’s the taxpayer== They are taxpayers as well. I love it when someone attacks someone else for the pay and benefits they get. I don’t know what you make Sue but I don’t think it’s fair. I think you should take a pay cut. See how silly that sounds? It’s just as silly when people like you make those arguments. - RNUG - Thursday, Nov 1, 18 @ 12:09 pm: == The Employer pick up is pretty universal throughout the State. The school districts pay the teacher portion thru CBA agreements. == That is true for a lot of districts BUT it comes with a qualifier or two. That was an individual choice of hundreds of school districts, to pay that as a benefit instead of giving the money in raises or as another benefit. And, as Steve Schnorf used to point out when the State did it for SERS for a few years, it held down the pension credible salary, which held down the amount of the actual pensions. - Anonymous - Thursday, Nov 1, 18 @ 12:11 pm: HUH? The taxpayer is paying 100%? This is news? Since it’s a publicly funded job, who in heavens name else would be paying them? GE? Google? This is wordplay. My first job was quoted me as X$ Imagine my shock when my first paycheck came and it was 9.4% less. Huh? Where’d it go? So they can either tell you your salary will be XYZ dollars and then take out 9.4% OR they can tell you your salary will be ABC$ with the 9.4% already accounted for. Wordplay. Either way, yes, public jobs are paid —ALL public jobs are paid with taxpayers dollars. Is this a new concept for you? - Sue - Thursday, Nov 1, 18 @ 12:17 pm: Demoralized/anon- I am shocked just shocked at your response. All I am saying is the participants are getting their contribution paid by the employer so arguing they held up their part of the deal is total BS. As the State continues to lose taxpayers to pay their locales- the only answer you ever have is raise taxes and then more folks leave. I wonder what percentage of TRS beneficiaries left Illinois to avoid contributing to their own pension costs? - Morty - Thursday, Nov 1, 18 @ 12:22 pm: Sue- don’t you ever get tired of being wrong? The last reputable numbers I saw said 51% of districts had a pickup. So 49% don’t. That’s a lot closer to half- not near “all” - Anotheretiree - Thursday, Nov 1, 18 @ 12:30 pm: Since Sue put her crown of thorns on early today, I think its time to move on to the next phase… negotiations. We are one Ruth Bader Ginsburg heartbeat away from an activist conservative Supreme Court which will give Sue her hearts desire of selectively shafting pensioners via Stet Bankruptcy….So…how much do you want back ? Will you settle for the 3% AAI ? 2% annual reductions ? What is your proposal ? - Anonymous - Thursday, Nov 1, 18 @ 12:33 pm: Looking at the big picture of this, it’s disheartening to think of these venomous folks who want the best top notch teachers for themselves and their kids but think they should be paid minimum wages and live under a bridge in retirement. They sure did think Education was important when it was for them. All you can say is we have an awful lot of selfish people who want everything for nothing. - Cook County Commoner - Thursday, Nov 1, 18 @ 12:33 pm: The taxpayers have no appetite for increased taxes, especially with ongoing demographics favoring more and more seniors on fixed incomes. Ultimately, it seems the pols will cannibalize resources from expected baseline gov services to fund pensions, but this is a can kick. Sooner or later, the worst gov pension funds will begin eating into principal. Then the competing lawsuits begin. Citizens demanding basic gov services on one side and gov pensioners demanding funding on the other. Seems the timeline is long enough to allow the current crop of pols to fade away and wash their hands of it. - Jibba - Thursday, Nov 1, 18 @ 12:37 pm: This is so silly. Everyone knows it needs to be paid (barring a deus ex machina from SCOTUS), so what is the best way? Tax retirement so that retirees can contribute, since they received most of the benefits of a low tax system? Probably, and the AARP might complain but many retirees will understand and pay. Increase income tax in a progressive manner? Probably, to fix the lack of progressivism and because it is needed. Increase sales tax, the most regressive tax? Probably not. Or just continue to whine until Hades freezes over? Certainly. - wondering - Thursday, Nov 1, 18 @ 12:38 pm: I think some of these comments spell it out. Taxing public retirment benefits is a means for reducing pensions, albeit, backdoor. A strong arguement could be made this would be unconstitutional. - Jibba - Thursday, Nov 1, 18 @ 12:41 pm: Wondering…you are correct, which is why it would be necessary to tax all retirement income, not just public pensions. There would need to be a huge exemption, though, which would protect most small pensioners. Perhaps starting at $50K or so. - Ole' Nelson - Thursday, Nov 1, 18 @ 12:42 pm: wondering I think taxing all retirement benefits (not just public pensions) above a certain level could work. - Ole' Nelson - Thursday, Nov 1, 18 @ 12:43 pm: sorry Jibba I was slowly typing and you beat me to it. - Cook County Commoner - Thursday, Nov 1, 18 @ 12:52 pm: Taxing retirement benefits in Illinois is a likely non-starter. Private sector retirees will not permit their SSA, private pensions and IRA withdrawals to be taxed. For most private sector retirees, there are no COLAs. And the SSA bumps are a joke. Any pol who thinks this will fly should review the 1989 video of Congressman Rostenkowski being chased by seniors and multiply it by 100. - wondering - Thursday, Nov 1, 18 @ 12:53 pm: Jibba, a reduction is a reduction…”the benefits of which will not be diminished or impaired”…robbing from Peter does not legitimize robbing from Paul. It is a no go. - Jibba - Thursday, Nov 1, 18 @ 1:07 pm: Wondering…I suspect you are incorrect because we are talking tax policy that allies to all citizens. By the same logic, you would argue that any tax rate increase is a diminishment, and clearly that already happened a few years ago. The key is that it would have to apply to all. To CCC: you are right that many would complain and protest, but with a high exemption, most SS recipients would pay nothing at all on their SS pension, although they might pay if they had additional income such as IRAs/401Ks. To be clear, I am not advocating this. I am just saying that there is a choice to be made as to who will pay and how much. Spreading the burden most widely seems the most fair, but you can choose differently. However, a choice and a solution must occur. See Federal court order yesterday about lack of funding for mental health care yesterday…funds will need to be found for this and everything else. There aren’t enough cuts in the budget to find the funds. - Anotheretiree - Thursday, Nov 1, 18 @ 1:08 pm: Of course you can tax retirement income of State retirees. No way the constitution prohibits that. Unless you tried to tax only State retirees. I still have to pay for a fishing license…not a diminishment ! I’m ok with it being taxed as part of a grand bargain. (Progressive Income Tax, Service sales tax, retirement income). But a 50K exemption is too large. Wont get enough dollars with that. - Generic Drone - Thursday, Nov 1, 18 @ 1:08 pm: Well if we are looking for ways to pay for pension debt, how about placing taxes or “fees” on all campaign contributions. They seem to be flush with cash. - Demoralized - Thursday, Nov 1, 18 @ 1:12 pm: ==arguing they held up their part of the deal is total BS.== No, it’s not. It’s only BS to those of you who want to complain about what someone gets. If you have a problem talk to your local school board. Instead people like you like to blame the employee. And, as I stated, they pay taxes too. They aren’t getting a “free ride” like you seem to be implying. ==I wonder what percentage of TRS beneficiaries left Illinois to avoid contributing to their own pension costs?== What does that have to do with anything? Here’s the answer - it has nothing to do with anything. - wondering - Thursday, Nov 1, 18 @ 1:22 pm: Oh my Jibba, the tax increase a few years ago did not apply to pensions, so what is your arguement? Non public pensions can be taxed, not public, it would be an impairment and reduction. There is no key, try to get past it in your mind. - Jibba - Thursday, Nov 1, 18 @ 1:27 pm: Wondering…OK, that might have been faulty logic, but I believe I am correct about the rest. How about a tax attorney weighs in? Unless you are one, of course. - SSL - Thursday, Nov 1, 18 @ 1:39 pm: Fear not, for in a week’s time we shall have the answer presented to us by our newly elected savior JB. He promises us great things, and through a vision he alone has seen, all ills of the state shall be healed through a tax plan so fair, only a select few shall be required to contribute more, while most shall receive a reduction in taxes. What a glorious day it will be, as our dear leader meets with his blessed brethren Mr. Madigan and Mr. Cullerton to cast lots. Just a few more days. - wondering - Thursday, Nov 1, 18 @ 1:57 pm: Jibba….see logical fallacy…”appeal to authority” - Anonymous - Thursday, Nov 1, 18 @ 2:00 pm: “Non public pensions can be taxed, not public, it would be an impairment and reduction.” I don’t think that is correct. I believe an equal protection argument could be made if the state tried to tax private pensions and exempt public pensions. Also, I don’t think taxing all pensions in Illinois would violate Il Constit Art. 13. The contractual right to a pension amount is not being diminished/compaired. The league eagles here should weigh in. - JIbba - Thursday, Nov 1, 18 @ 2:05 pm: Wondering…you aren’t exactly showering us with facts using your dorm room philosophy. Since we’re arguing about something that has never happened before, perhaps this requires judging by the ILSC. In this case, appeal to authority is warranted. In any case, unless you are a tax lawyer, you are guessing like the rest of us. - RNUG - Thursday, Nov 1, 18 @ 2:17 pm: I suspect changing the retirement income tax exemption would be found legal if retirement income from all sources was taxed. That would not be a specific targeting of public pensions; they would most likely find that the State’s interest in benefitting all citizens would override the pension clause protection in this cases … especially since I don’t recall reading any mention about taxation in the Con-Con discussions the pension group had. But if they try to get cute and only tax certain kinds of retirement income, it may not fly with the IL SC. And yes, I know other states do exempt SS but only NY and AZ have a pension clause like Illinois. Illinois copied the New York clause, and NY fully exempts SS, military, civil service, and state & local government pensions. NY also exempts the first $20K of private pensions. If you were looking at other states, NY is the closest precedent. Arizona has a close but not identical pension clause. In AZ, SS & railroad are fully exempt. The first $2,500 of military, civil service, state & local pensions are exempt. Private pensions are fully taxed. Bottom line, I think, is taxing only public pensions would not work legally. General taxation probably would be found legal. - RNUG - Thursday, Nov 1, 18 @ 2:22 pm: Rich, I just did a long post on taxation in pension protection clause states that may have gotten trapped. Can you check on it? - Anonymous - Thursday, Nov 1, 18 @ 2:29 pm: Wondering..since facts are good, the Civic Federation proposes to tax pensions that are now tax exempt (p.5 of link below). Also, taxing all pensions has been raised on this blog and in the news for years as possible methods of increasing revenues, so your emphatic denials fly in the face of discussion of many parties. Not saying you’re wrong, but don’t be too convinced by your own one-note “diminishment” argument. ILSC will be the final word, of course. Also, please read my entire post of 1:07, and wonder a little how you would balance the budget in FY2019. https://www.civicfed.org/sites/default/files/fy2019_recommended_operating_budget_analysis.pdf - Jibba - Thursday, Nov 1, 18 @ 2:29 pm: 2:29 was me. - wondering - Thursday, Nov 1, 18 @ 2:45 pm: Jibba, nothing dorm room about it. Benefits will not be diminished or impaired. Very clearly stated in the Constitution. Taxing them would diminish or impair. If, on the other hand, they were taxed at the beginning of employment, they could be, they were not. Not to digress, but you kind of sound like Trump and the 14th amendment executive order statement. The Illinois constitutional restriction is what it is. And no, it would not violate equal protection anymore than handicapped parking placards violate equal protection See fallacy of logic, ad hominem, Jibba. I would add, what might of been or should have been or should be, is not the issue, the isue is what is it? They are protected from all forms of reduction, obtuse, orblique or otherwise. - JS Mill - Thursday, Nov 1, 18 @ 2:46 pm: =It would be less than that. In order for there to be no debt, salaries from which pensions are calculated would have been lower because that money would’ve gone into pension payments instead. Plus many pension enhancements would never have been implemented. That, along with tax increases, was needed for zero pension debt.= I think you are wrong. The debt was created when the state used the pension money for other things. Things like roads and corporate welfare, pet projects and just about anything else. Had they raised the necessary revenue to fund what they wanted, wages would have increased etc. The IAA enhancement would still be there. That was done for a political not a financial purpose. =But it’s there and it has to be paid. Pay pensions first and fund education with whatever is left.= CZ, that statement is so bad it is Rauner bad. You stole something and the court says you have to pay it back but you can punish the victim while you do so? Genius. - JIbba - Thursday, Nov 1, 18 @ 3:01 pm: Wondering…please read RNUG, who has been more often correct on these subjects than anyone else here. Your repetition of the diminishment clause does not address whether broad tax policy for the general population is bound by that clause. Lacking specific guidance in the constitution or the arguments of the convention, I’d reserve judgement if I were you. States and feds have wide latitude on that subject, and if the ILSC has to weigh in on the subject I will not predict your outcome. But the vehemence of your argument does not affect its veracity. And exactly how would you get enough revenue next year? I’m more than willing to just raise taxes for the general population instead, if that makes you happier. But I suspect not. - Anonymous - Thursday, Nov 1, 18 @ 3:01 pm: Rnug: -the State’s interest in benefitting all citizens would override the pension clause protection in this cases- sounds suspiciously like the “police powers” arguement that was shot down. … Any 2pm: -I believe an equal protection argument could be made if the state tried to tax private pensions and exempt public pensions- The flip side of that is if you can’t tax public, under equal protection you can’t tax any.(pun intended) - wondering - Thursday, Nov 1, 18 @ 3:05 pm: Whoops, Anonymous 3:01 was me(again) - Last Bull Moose - Thursday, Nov 1, 18 @ 3:09 pm: The pensions must be paid. However, funding the pensions will crowd out other spending. It is hard to identify where cuts can be made. Departments seem unable to achieve their goals with current funding levels. - wondering - Thursday, Nov 1, 18 @ 3:11 pm: Well Jibba, I am a wild and crazy guy today. How would I get enough revenue next year? Well, as long as we are abandoning constituional norms and edicts, let’s reach back 20 tax years and pass a retroactive tax so the people who benefited by the underfunding of pensions can be brought to justice and pay up. - Jibba - Thursday, Nov 1, 18 @ 3:15 pm: Wondering…Arumentative and unhelpful. Fed you enough today. - RNUG - Thursday, Nov 1, 18 @ 3:18 pm: - Anonymous - @ 3:01 pm The universal benefit argument is not the same as “police powers”. The, if you will, “risk/reward” argument has been successful in some (non-pension) situations. The other argument people have been dancing around today is that the pension benefits would still be protected, including the amount earned / paid … but the government would be clawing some back through non-selective taxation. Otherwise, anything we retirees spend on taxes be diminishment. - wondering - Thursday, Nov 1, 18 @ 3:43 pm: All the end run shenanigans in the world are not going to change the situation. They are nothing but illicit shortcuts. There is a process, it is constitutional amendment. Dubious, considering the Federal constitutional prohibition concerning contracts, but certainly a place to start. Why don’t the shortcutters at least advocate for that? Why haven’t they in the last 10 years? Because, the people of Illinois support the pension clause and will not change it, that is why. This”unsustainable” pension crisis is sustainable. It is called general revenue funding of pensions. It would be far cheaper than beefing up the shortchanged pension funds. It is not a case of inability to pay, it is a case of unwillingness to pay - Big foot - Thursday, Nov 1, 18 @ 3:51 pm: Sue, have no idea where you got your information. Eight percent of my gross was with held for our pension. - Blue Dog Dem - Thursday, Nov 1, 18 @ 3:52 pm: Who, in their right mind, would want to be the next governor of Illinois? - Whatever - Thursday, Nov 1, 18 @ 3:56 pm: Wondering @ 12:53 ==Jibba, a reduction is a reduction…”the benefits of which will not be diminished or impaired”…robbing from Peter does not legitimize robbing from Paul. It is a no go.” RNUG is right that a tax on all pensions would be constitutional. The USSC long ago held that the federal prohibitions against diminishing compensation of judges, legislators and even the president do not prohibit imposing a generally-applicable income tax or tax increase to their salaries. (FDR actually filed a return claiming that an income tax increase did not apply to his presidential salary. Tax Notes has it on their web site.) - Anonymous - Thursday, Nov 1, 18 @ 4:30 pm: BDD 3:52pm, I dunno, but no matter how bad the outlook is, “someone” will be gov, this coming term and every one after it. There’s never a shortage of wannabes. - Six Degrees of Separation - Thursday, Nov 1, 18 @ 4:32 pm: 4:30pm was me. - wondering - Thursday, Nov 1, 18 @ 4:41 pm: whatever….that is federal, not state. it is also about intent, the general federal taxation did not equate to adding a new tax on pensions when they were previously exempt.Not only that, the state never collected tax on pensions before or after the the adoption of the state constitution and protection clause. - RNUG - Thursday, Nov 1, 18 @ 5:02 pm: - Wondering - While the IL SC would not be bound by the various SCOTUS decisions on diminishment at the Federal level, you can bet the IL SC (or at least their law clerks) will look at the Federal cases. Other than the fairly small body of IL case law, there isn’t all that much (relatively speaking) that would match closely. On the contract side of the protection, US Contract Law cases would definitely be applicable as precedent. When trying to clarify issues, you take case law where you find it. - Anonymous - Thursday, Nov 1, 18 @ 5:24 pm: Taxing retirement income would sure help the state out of it’s woes. However, legally, you cannot select one type of retiree and tax them and them alone. Is everyone up for a retirement tax on all retirement income? - Anonymous - Thursday, Nov 1, 18 @ 9:14 pm: The people who complain about taxes are the first ones to say that there’s no such thing as a free lunch. - Andy S - Thursday, Nov 1, 18 @ 10:51 pm: My educated guess is that the state could fully tax public and private pensions, and exempt one-half of Social Security benefits, without violating the pension protection clause. The reason is that pensions arise entirely from before tax contributions made by the employer and employee - these contributions are deducted from income for tax purposes, so the employee never paid federal or state income tax on what was contributed. However, the employee portion of the Social Security payroll tax is paid with after-tax money, i.e. it is applied after the employee has already paid income tax. Because the employee portion of the SS payroll tax is half of the total, a reasonable argument could be made that exempting one-half of SS benefits from income tax does not unfairly discriminate against public pensioners. - RNUG - Thursday, Nov 1, 18 @ 11:16 pm: - Andy S - Are you aware some public employees (specifically teachers and most LE plus some other categories) were / are legally forbidden from participating in SS? In most cases, even if they had a second job where they did contribute to SS, they are not allowed to collect it because of the non-coordinated government pension and various Federal rules. Explicitly exempting just SS would bring an equal taxation treatment question into play. Had those public servants been allowed to participate in SS, they would have had a lower government and some level of SS payment. That is one reason (of several) why I think the wiser choice legally would be tax all retirement income and just provide a per person exemption amount intended to offset the taxation of Social Security. The State could exclude the maximum SS of $23,456 (2018 figure) and index the deduction to the changed number each year. Or the State could go with the approximately $32,000 average retirement a teacher receives and index it. Or just pick a fixed number, like $25,000 or $50,000 or whatever. That would be the legal way to tax retirement while excluding SS from taxation. - RNUG - Thursday, Nov 1, 18 @ 11:21 pm: $33,456 SS max … typo’ed - City Zen - Thursday, Nov 1, 18 @ 11:39 pm: ==Explicitly exempting just SS would bring an equal taxation treatment question into play.== Just because you keep saying that doesn’t make it true. As Andy S explained, social security payroll tax is paid with after-tax money. That is completely different than my un-taxed 401k or your un-taxed pension contributions, which is why those are called deferred compensation. Your plan to offer one over-arching tax exemption to all retirement income is actually inequitable because of that very fact. - RNUG - Friday, Nov 2, 18 @ 8:23 am: -Cuty Zen-, So how would you deal with the inequity of the teachers, etc., being excluded from SS? Sorry, comments for this post are now closed.