* The headline on this Center Square story is misleading: “As Illinois budget projections get worse, more call for tax on retirement income”…
With Illinois’ financial future looking grim, more organizations are advocating for a tax on retirement income.
Gov. J.B. Pritzker’s office released its five-year plan, claiming that even with what his office described as “modest growth,” the state will need billions of dollars more than what it currently brings in.
Marie Dillon, director of policy with the Better Government Association, said Illinois’ budget mess was largely due to its pension debt that was caused by many who have retired and won’t pay taxes on their income.
“Illinois doesn’t tax your pension, it doesn’t tax your 401(k), it doesn’t tax your Social Security, and yet the state is broke,” she said. “The generation that is about to age out from state income taxes is responsible for the pension debt and would be leaving it to this younger generation.”
Illinois is one of three states that has an income tax that excludes retirement or pension income.
The BGA joins the Civic Federation, the Civic Committee of the Commercial Club of Chicago the Center for Tax and Budget Accountability and others in calling for a tax on retirement income.
The BGA has supported a tax on retirement income since 2016. This isn’t some growing movement.
Also, the Civic Committee only came out in favor of the retirement tax as a way to stave off the governor’s graduated income tax. It obviously didn’t work. And the CTBA loves them some taxes, so of course they’re for it.
* The BGA’s policy director did recently double down…
But do they really leave over taxes? That’s hard to prove or disprove. Florida is 60 degrees in February and has no income tax, period, so if you don’t already live there it’s probably not because Illinois isn’t taxing your pension checks. Maybe it’s because Florida is steamy from April to October and the cockroaches can fly. Maybe Illinois is home.
Florida used to be mine. But I wouldn’t move back to avoid paying income taxes, because I have too many reasons to stay in Illinois. Reason No. 1 is my son, a first-year public school teacher. Illinois should be more worried about keeping him than me.
- Mike - Thursday, Oct 24, 19 @ 4:03 pm:
Ignorant comment by that BGA’s policy director
- Oswego Willy - Thursday, Oct 24, 19 @ 4:10 pm:
Taxing retirement income is as “likely” as changing the pension clause in the state constitution.
- RNUG - Thursday, Oct 24, 19 @ 4:13 pm:
And Texas is ridiculously hot in the summer.
- Al - Thursday, Oct 24, 19 @ 4:25 pm:
This is useful. It distracts us from discussing solutions.
- Langhorne - Thursday, Oct 24, 19 @ 4:33 pm:
Marie—you want me to pay taxes on my retirement income? Pass a bill. It should be taxed, but dont say the prob is i wont pay taxes on that income. I cant pass a bill. Count.
I am not responsible for the unfunded liability, the GA is.
- Grandson of Man - Thursday, Oct 24, 19 @ 4:41 pm:
Florida and Texas both can have horrific weather, with 40-50 inches of rain having fallen in Texas, per hurricane/storm. Texas and Florida both may not be that far away from turning bluer. Boy, will that be fun when policies like ACA Medicaid expansion can pass. Those “Christians” in the rural parts will really love it, giving health insurance to the least of these.
- Langhorne - Thursday, Oct 24, 19 @ 4:42 pm:
Marie—you are assuming that revenue from taxing retirement income would be used to pay down pension debt. You crack me up.
- Randomly Selected - Thursday, Oct 24, 19 @ 4:45 pm:
The only bipartisan issue among regular people in the state is not taxing retirement income.
- SSL - Thursday, Oct 24, 19 @ 4:51 pm:
It’s a toxic issue. Those retirees have a little more flexibility in terms of moving, and they know how to vote. At some point you would think taxing retirement income would have to be part of the solution, but man that would take some courage. Best to kick that can down the road a ways.
Don’t fret about Florida or Texas Grandson. Florida adds a million residents every three years, and Texas does even better. How many have we added in Illinois since 2010?
- JS Mill - Thursday, Oct 24, 19 @ 4:55 pm:
Does CZ work for Center Square? /s
I do agree that retirement income should be taxed. If not all then at least that over $75k.
- anon2 - Thursday, Oct 24, 19 @ 4:59 pm:
There is a compelling argument for taxing some retirment income, but there is no political upside in doing so. But there would be a downside, given how unpopular that policy is with older (50+) residents who constitute a large share of primary voters.
- Chicagonk - Thursday, Oct 24, 19 @ 5:16 pm:
I’m in favor of taxing retirement income. The population of people over 65 in Illinois is around 14%. That is a little below average, but 80% of states fall within 13.5% to 16% elderly population. So for those thinking that there will be some great exodus if retirement income is taxed, I can pretty much guarantee that the impact would be negligible. If we already know that Pritzker’s graduated tax increase isn’t going to be enough to get the state to fiscal stability and more taxes are going to be needed, broadening the base is one way to limit the pain.
- Dybalaton - Thursday, Oct 24, 19 @ 6:21 pm:
Dear BGA Director, a recent poll showed that the number one reason people cite for leaving Illinois is high taxes. Your bias is showing.
Best regards
- Stuntman Bob's Brother - Thursday, Oct 24, 19 @ 6:27 pm:
From the article:
==Illinois is one of three states that has an income tax that excludes retirement or pension income==
This statement is misleading. The majority of states provide some sort of exemption for retirement income, although most do not exempt 100% of it, as Illinois does. You can protect the vast majority of retirees, while still having wealthy retirees pay “their fair share”. I would propose that Illinois exempt the state’s median income (approximately $63,000 for a household) from combined pension, 401k, IRA, and SS income, and apply whatever state tax rate that is applicable above that amount (if we ever get to a graduated rate). It does not have to be “all or nothing”. https://taxna.wolterskluwer.com/whole-ball-of-tax-2018/state-retirement-taxes
- Steve - Thursday, Oct 24, 19 @ 6:34 pm:
Taxing retirement income is an easier task than changing the pension clause in the state constitution … and quicker.
- JS Mill - Thursday, Oct 24, 19 @ 6:54 pm:
=This statement is misleading=
No, it is a statement of fact. Your ward parsing aside, only three states with an income tax do not tax retirement income.
Fact.
- Six Degrees of Separation - Thursday, Oct 24, 19 @ 7:05 pm:
Didn’t Rep. Skillicorn propose an amendment to the state constitution about a year ago prohibiting retirement income from being taxed? Seems like whatever “movement” there is on this issue is sideways at best.
- Anonymous - Thursday, Oct 24, 19 @ 7:28 pm:
==taxing retirement income is an easier task than changing the pension clause in the state constitution==
And would generate a whole lot more since it would apply to all retirees, not just those collecting public pensions. If you need more tax revenue, then you need to go with the bigger $$
- Blue Dog Dem - Thursday, Oct 24, 19 @ 9:39 pm:
Now a Grandson is giving away people’s money in Texas. Must be fair.
- Well well well - Thursday, Oct 24, 19 @ 10:00 pm:
The promised pension was a tax free pension. Call me crazy but it seems to me that taxing pensions would be an unconstitutional diminution of benefits. If you can legally tax pensions at, let’s say, 5%, what’s the stop you from taxing them at 20%? 50%? 100%? Where is the line?
- Stuntman Bob's Brother - Friday, Oct 25, 19 @ 12:44 am:
==No, it is a statement of fact. Your ward parsing aside, only three states with an income tax do not tax retirement income. Fact.==
A statement can be factual and misleading at the same time, but I’ll defer to your expertise. Would it be fair to say “The statement, though technically factual, does not provide enough information on a complicated topic, and readers would be better informed if they examined the facts”, which I provided in the link?
- foster brooks - Friday, Oct 25, 19 @ 7:28 am:
does the constitution have to be amended to tax retirement income? I wonder how many people with 401k’s would vote for this?
- Danville's Finest - Friday, Oct 25, 19 @ 9:39 am:
Is it possible to strike some sort of compromise; a Retirement Income Repatriation Act that only targets retirement payments that head out of state? Basically, treating the pension payments the same as the income of someone that lives in NW Indiana but works in downtown Chicago?
Not sure if it would legally fly, but from a ‘political heat’ perspective, there is nothing to lose; people impacted don’t vote in Illinois.
- Danville's Finest - Friday, Oct 25, 19 @ 9:40 am:
To clarify my question/point…I meant public pension payments specifically.
- Oswego Willy - Friday, Oct 25, 19 @ 9:45 am:
=== I meant public pension payments specifically.===
You want at a law… targeted at those who leave the state… with a pension?
So they’re forced to live somewhere or they’ll get taxed.
How is that at all constitutional?
Lil early to be imbibing.
- Newcomer - Friday, Oct 25, 19 @ 9:57 am:
I find a number of Center Square pieces to be misleading or inaccurate
- Sure thing - Friday, Oct 25, 19 @ 10:03 am:
Sounds like a catch 22. The state is already losing more people each year than the year before. Tax retirement income and that will increase the number. Don’t tax it and raise it on the non retirement income and it will still increase. People will continue to leave regardless. Only question is how many.