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* We’ve discussed this stuff before, but I thought it was important enough to make it my weekly syndicated newspaper column…
One of the main reasons the Democratic Party did so poorly across the nation last year and lost ground in Illinois was the defection of senior citizens to the Republican Party.
On Election Day 2006, national exit polling showed voters 65 and older split their ballots 49-49 between the two parties. In Illinois, however, senior citizens went with Democrat Rod Blagojevich over Republican Judy Baar Topinka by 10 points, 50-40.
Last year, national exit polling showed Republicans with a huge 59-38 margin over Democrats among seniors. In Illinois, the exit polls showed that Pat Quinn lost the senior citizen vote to Republican Bill Brady by 17 very big points, 55-38.
Quinn ended up beating Brady by fewer than 32,000 votes. Blagojevich won his last election by more than 10 times that amount: 367,000. The lost senior vote accounted for more than half the difference between those two margins.
So, some Illinois Democrats may be forgiven for cringing last week after reading the headlines about how Senate President John Cullerton was floating the idea of taxing retirement income. Their party needs to woo that all-important and rapidly growing demographic back to the fold, not alienate it even more. Those stories probably didn’t sit well at all with the oldsters. There’s a reason why only five states tax all retirement income, and it ain’t fiscal.
To be fair, the headlines didn’t tell the whole story. Cullerton told me he had no intention of moving forward with the proposal unless the Republicans joined him. And, he said, he would use the new tax revenues only to lower rates for everyone. It would have to be revenue neutral, he said.
Cullerton also said he was open to limiting the tax to annual retirement income above $100,000. But the Department of Revenue told the Chicago Tribune that taxing only those higher-income seniors would net the state just $70 million. Revenue that meager wouldn’t budge the overall rate at all.
It turns out that the real money is in the low-income brackets. All but a small fraction — $276 million — of the $1.9 billion raised by taxing retirement incomes would come from seniors making less than $50,000 a year, according to Tribune numbers obtained from the General Assembly’s Commission on Government Forecasting and Accountability.
Chicago’s two newspapers both editorialized in favor of taxing retirement income because of the “fairness factor.” Why should well-off oldsters get a free ride on income taxes while lots of working families are struggling to stay afloat in these trying times?
There’s something to be said for spreading the burden around and lowering overall tax rates.
But exempting lower retirement incomes wouldn’t bring in any real money. Not to mention that it probably wouldn’t be allowed under the Illinois Constitution, which prohibits graduated rates and generally is held to frown upon exempting lots of income from taxation. As a result, Cullerton backed away from the idea the day after he floated it.
The better idea was passed by Cullerton’s Senate two years ago, but it went nowhere in the House. That Senate bill would have broadened our narrow state sales tax to cover more things, such as services. Now, if you buy shampoo for your dog, you pay a sales tax. If you take your dog to one of those swanky grooming boutiques, you don’t pay any sales tax. If you buy disposable diapers for your baby, there’s a tax, but diaper service is not taxed.
Keeping the tax base so narrow means that rates have to go up that much higher in a crisis. Widen the base, and rates can be stabilized or even lowered.
Lots of people don’t even know that they pay no state sales tax on food and medicine. And I personally know some retired seniors who were furious about this year’s income tax hike, even though it didn’t cost them a dime.
The idea would be to spread a little bit of tax “pain” around to lessen the overall sting. But, hey, it’s all academic now. The General Assembly raised the income tax 2 percentage points in January.
And a big reason why they had to jack it up so high to reach the revenue they needed is that our screwed up tax system exempts so much income and just about all services.
* Related…
* Quinn finally sets DHS cut at $57 million
* State may have more money come June: The state, which has been dealing with a multi-billion dollar deficit, will have $1.9 billion more than what was assumed in the current budget when the current fiscal year ends June 30, according to the legislative Commission on Government Forecasting and Accountability.
* Illinois’s Circuit Breaker program could be switched off
* Fresh start: Illinois as a blank slate
* Thousands got Illinois-subsidized jobs — but who?
* Online retailers forced to collect sales tax
* Illinois Affiliates Dumped By Overstock
* Illinois’ No. 2 boxing official on leave amid conflict-of-interest complaint - Referee alleges official used position to benefit family
posted by Rich Miller
Monday, Mar 14, 11 @ 2:31 pm
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I didn’t realize Quinn lost the senior vote so badly. That’s church for a Democrat, or should have been.
Given that spread, I wonder how many senior voters in Cook County the Illinois GOP left on the table with their lack of ground game.
Comment by wordslinger Monday, Mar 14, 11 @ 2:58 pm
I still expect another revenue modernization as we approach the end of the spring session, due to so little budget pain relief to education and community based health and human services. Extending the sales tax to a cluster of services is the logical next step.
But I hope they also place the Constitutional Amendment for a graduated income tax onto the ballot at the next opportunity.
Comment by Capitol View Monday, Mar 14, 11 @ 3:00 pm
I could not agree more with your characterization of Illinois tax system as “screwed up”. As a practicing accountant, I get to deal with the system on a daily basis. The system is antiquated, rife with exclusions both business and personal and generally unenforced. It is way past time to overhaul this mess. A commission consisting of tax professionals, not legislators, should be formed to review the system and recommend changes. Changes should be done on a system wide basis and not piecemeal.
Comment by WRMNpolitics Monday, Mar 14, 11 @ 3:15 pm
Not that I know everything about taxation but why don’t we tax more services especially these luxury services like a dog grooming boutique. I’m against income taxes anyway but if we have to tax anything it ought to be services.
Comment by levois Monday, Mar 14, 11 @ 3:15 pm
The fundamental rate for:
•Qualifying food, drugs, and medical appliances is 1%.
What do you mean we don’t pay a sales tax on food and medicine? Geesh!
Comment by justsickofit Monday, Mar 14, 11 @ 3:22 pm
@ justsickofit
He is referring to the state’s portion. The 1% goes to local governments, so there is technically no state tax on those items. It’s a very confusing statement, though, since the tax is collected by the state and distributed to the local governments.
Comment by Pelon Monday, Mar 14, 11 @ 3:34 pm
thanks, Pelon
Comment by justsickofit Monday, Mar 14, 11 @ 3:48 pm
Tax subscriptions, whether print or internet.
–About to be Banned for Life
Comment by Excessively Rabid Monday, Mar 14, 11 @ 3:49 pm
ER, that wouldn’t “help” either. lol
Just sayin…
Comment by Rich Miller Monday, Mar 14, 11 @ 3:51 pm
There is even ‘more to be said’ for reducing the cost of state government thus reducing taxation. An idea whose time has come most places other than Illinois and Chicago.
Comment by walter sobchak Monday, Mar 14, 11 @ 3:56 pm
Walter, there’s nothing more powerful than an idea whose time has come. Lay it on us, brother.
Comment by wordslinger Monday, Mar 14, 11 @ 4:19 pm
I think increasing the personal exemption for everyone rather than lower the rate or set a higher retirement income exemption might be a better way to go at it. Seems to me that doing that would benefit the lower income the most, retired or working, while fitting in with our existing tax structure. We really need both sides to participate in this, though, because it’s a landmine for one party to go at it alone.
Perhaps another way to go about it would be to leave existing retirees alone and instead tax the money when it’s put into the retirement account rather than when it’s pulled out. That might get the current retirees off your back but isn’t going to be a winner for current workers and would create a weird situation where a traditional IRA isn’t taxed federally but is at the state level at the time of contribution. This would fix one problem which is that the state would be taxing the money that was earned in the state (and getting it now instead of decades from now) that the state may never see if the person ends up retiring in another state. It was deferred from their earnings in IL but another state potentially reaps the benefits.
I’m all for increasing reliance on sales tax over income tax as well and bringing services into the mix is one step towards that.
Comment by thechampaignlife Monday, Mar 14, 11 @ 5:36 pm
I’ve been trying to find links to compare 2002, 2006, and 2010 Illinois gubernatorial election results by age, but have yet to find a link with the breakdowns that would show if Blago’s 2006 senior appeal was momentary, resulting from the offering of free public transit rides to seniors. I’m guessing that Quinn didn’t so much lose senior votes in 2010. Blago bought the votes in 2006 with the free senior transit ride program, then in 2010 the senior vote went back to pre-2006 norms.
So was the Quinn - Brady breakdown among seniors in 2010 closer to the norm or not? Was 2006 the exception?
Comment by Kasich Walker, Jr.'s Consultant for Spiritual Fitness & Suffrage Monday, Mar 14, 11 @ 7:48 pm
Blago didn’t institute free rides until 2008.
Comment by wordslinger Monday, Mar 14, 11 @ 8:29 pm
Well, thanks for clearing that up, slinger.
Comment by Kasich Walker, Jr.'s Consultant on Spiritual Fitness & Sport Monday, Mar 14, 11 @ 9:02 pm
But I still wonder: was the Quinn - Brady breakdown among seniors in 2010 closer to the norm for Illinois gubernatorial elections or not? Was 2006 the exception?
Comment by Kasich Walker, Jr.'s Consultant for Spiritual Fitness & Suffrage Monday, Mar 14, 11 @ 9:22 pm
===Was 2006 the exception? ===
No.
Comment by Rich Miller Monday, Mar 14, 11 @ 10:29 pm
===Was 2006 the exception? ===
No.
————–
Where can breakdowns by age group (link) be found for past Illinois gubernatorial elections?
Another guess — evidently wrong — was that seniors went to Rod because they weren’t willing to vote for a woman (JBT) for governor.
Comment by Kasich Walker, Jr.'s Consultant for Spiritual Fitness & Suffrage Tuesday, Mar 15, 11 @ 7:02 pm