* The SALT work-around is a pretty interesting idea. From a press release…
In an effort to put more money in the pockets of Illinois taxpayers and infuse funds into the Illinois economy, State Representative Peter Breen (R-Lombard) has launched the Illinois Tax Reform Plan. The plan, consisting of three taxpayer-friendly bills, was unveiled today at a press briefing in Springfield. Each bill has the potential of lowering taxes on Illinoisans and Illinois businesses.
The cornerstone of Breen’s package is HB 4563, which expands Illinois’ current Invest in Kids Act tax credit model to allow Illinoisans to make fully deductible charitable contributions to 501(c)(3) foundations supporting public school districts, while receiving tax credits to reduce their partially deductible state and local income tax (SALT) payments. The new federal tax law provided a $10,000 limit on deductions for SALT payments, while placing no limit on charitable deductions. “While changes to the federal tax code are providing many opportunities for taxpayers to keep more of their hard-earned money in their own pockets, folks in states where property taxes and income taxes are too high need relief. The Congress left intact the full deduction for charitable contributions, and my Illinois workaround to the new SALT deduction cap relies on the very successful education tax credit model upheld by the Tax Court and IRS, and used by states across the country. This plan has the potential to put over $1 billion every year back into Illinois taxpayers’ wallets. Rather than sending this money to Washington bureaucrats, these dollars can be pumped into the Illinois economy, to help our state grow and prosper.”
Through Breen’s SALT workaround, the current Invest in Kids Act, which allows taxpayers to make donations to private schools in exchange for a tax benefit, would be expanded to include contributions made to K-12 school district foundations. Taxpayers can make annual contributions to school district foundations up to the total amount of their state income taxes and residential property taxes, in exchange for a tax credit equal to 100% of their donation. The bill would ensure little to no cost to the state by amending the school code to ensure that state payments to the K-12 districts benefitted by the program would be reduced by the amount of the total contributions received by the districts.
The second bill in the package, HB 4376, would allow parents who choose to send their children to K-12 private or parochial schools in Illinois to use their Illinois Bright Start program funds (529 Plan) to help offset those costs rather than only using those funds for college.
“Today’s Bright Start Program does not provide the flexibility provided by the recent changes in federal tax law, to allow families the ability to use their own 529 plan account for K-12 educational expenses,” said Breen. “My bill expands the Illinois Bright Start Program’s definition of ‘qualifying expenses’ so that families may enjoy the full tax benefits newly available through the revised federal tax law. Expanding the use of these tax-free funds will help hard-working Illinois families save for their kids’ education.”
HB 4376 also provides for a rollover of 529 plan funds into an Achieving a Better Life Experience (ABLE) account to help individuals living with significant disabilities. Whereas 529 plans may only be used for education, ABLE accounts may also be used for housing, transportation, employment training and support, assistive technology, personal support services and health care expenses. “These types of accounts really help folks living with disabilities to maintain their independence and quality of life,” Breen said. “Individuals with disabilities and their families often rely on public benefits for income, health care, housing and other assistance, and eligibility is largely based on meeting an income threshold. ABLE accounts allow families to create a long-term plan with defined tax benefits for covering the significant costs associated to living with a disability.”
The final bill in Breen’s Illinois Tax Reform Plan is HB 4562, a measure to support the small businesses that will start or grow as a result of the Tax Cuts and Jobs Act. HB 4562 will lift the requirement that individuals who operate a small business where they are the sole employee be in the unemployment insurance system. “This is a common sense issue. Individuals who operate a business where they themselves are the only employee certainly can’t really ‘fire’ themselves in the traditional sense of unemployment insurance, so they shouldn’t be forced to pay for this insurance,” said Breen. “There are thousands of single-employee businesses in Illinois, and while these entrepreneurs are contributing greatly to the Illinois economy, they’re being nickel-and-dimed through laws that force them to pay for services from which they would never benefit.”
Breen is hopeful he will have wide bipartisan support for all three bills and will be pushing for prompt consideration of the legislation in Springfield.
* Daily Herald…
In wake of Des Plaines Elementary District 62 paying more than $127,000 in severance to its former superintendent accused of sexual harassment, a pair of suburban lawmakers are co-sponsoring legislation requiring local governments to provide public notice of similar payouts in the future.
State Rep. Marty Moylan, a Democrat from Des Plaines, filed the bill with Rep. David McSweeney, a Barrington Hills Republican, in response to the payout given former District 62 Superintendent Floyd Williams Jr. in November.
The legislation would require any unit of local government, including school districts, to provide public notice within 72 hours of approving a severance agreement with an employee or contractor accused of sexual harassment or discrimination.
Under the bill, the government would have to publish on its website and in a local newspaper the name of the employee, the amount of the payment, and that the person was accused of sexual harassment or discrimination.
* Wall St. Journal editorial…
Democratic politicians in left-leaning states have been brainstorming ideas to avoid serious pension and tax reforms. The creative financial geniuses in Illinois have come up with a doozy: a magic bond that would save the state as much as it borrows.
Democrats in the state House have proposed issuing $107 billion in bonds to backfill the state’s pension funds, which are short $129 billion. Annual state pension payments are projected to increase to $20 billion in 2045 from $8.5 billion—not including interest on $17 billion in debt the state previously issued to pay for pensions.
At the request of state retirees, a University of Illinois math professor performed a crack analysis showing how the state could use interest-rate arbitrage to shave its pension costs. Under the professor’s math, the state could sell 27-year, fixed-rate taxable bonds and invest the proceeds into its pension funds. This would supposedly stabilize the state’s pension payments at $8.5 billion annually, save taxpayers $103 billion over three decades and increase the state retirement system’s funding level to 90% from 40%. Can the mathemagician make House Speaker Michael Madigan disappear too? […]
Republican Gov. Bruce Rauner won’t fall for this ruse. But if a Democrat defeats him this fall, unions may pull this magic bond out of their bag of political tricks.
So far, Martwick has no co-sponsors, so I’m not sure that “Democrats in the state House have proposed” anything of this nature. Not yet, anyway.