* Ralph Martire of the Center for Tax and Budget Accountability listed the following budget fixes and then told a Champaign-area group “You do those things, all problems are solved”…
— Reamortize its pension debt from a 30-year payback to 43 years, and level annual pension payments at about $7.3 billion. They’re scheduled to be $6.8 billion in the next fiscal year.
— Increase the personal income tax rate from the current 3.75 percent to between 4.25 percent and 4.5 percent. The rate was 5 percent until Jan. 1.
— Expand the sales tax to include consumer services.
— Start taxing retirement income on a graduated scale.
The amortization plan is a real problem because it immediately increases costs by half a billion dollars a year. The income and service tax arguments are both politically doable because the Dems would back the income tax and the governor has already proposed a service tax (although his campaign service tax plan mainly relied on revenues from trial lawyers).
But that retirement income tax is a legislative non-starter.
* From March 7, 2011…
Influential Senate President John Cullerton on Monday suggested the state should start taxing retirement income. Illinois does not currently tax pensions or retirement funds such as 401(k) plans, but Cullerton suggested that the idea be in the mix as part of an effort to change the state’s outdated tax system.f
* Just one day later…
Illinois Senate President John Cullerton is backtracking on a suggestion to tax retirement income, a statement to which many seniors didn’t respond well.
Keep in mind that Cullerton proposed merely taxing annual retirement income above $100,000. But the liberal lion ran away screaming less than 24 hours later.
* Back to Martire…
The new revenue, Martire said, would total $4 billion to $4.4 billion.
“It’s a lot of money but it’s less than 1 percent of our state’s economy,” he said. “That’s all it takes to solve our problems. So, you need to get after it and lobby for it.”
If he can come up with a new amortization plan which doesn’t immediately increase costs and finds a replacement for those retirement tax revenues, he’ll have much more of an impact.