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* 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such as 401(k) plans, but Cullerton suggested that the idea be in the mix as part of an effort to change the state’s outdated tax system.f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.
posted by Rich Miller
Tuesday, Apr 28, 15 @ 9:27 am
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I suspect any serious discussion is a non-starter as long as the governor keeps pretending that he proposed a balanced budget.
Comment by Wordslinger Tuesday, Apr 28, 15 @ 9:32 am
Illinois politicians realize taxing retirement income will result in an out flow of retirees from the state. Plus retirees vote more.
Comment by Anonymous Tuesday, Apr 28, 15 @ 9:33 am
One more item needed. Freeze spending for four years. You can not let the legislature use the increased revenue for new or expanded programs until our fiscal situation is stabilized.
Comment by Anonymous Tuesday, Apr 28, 15 @ 9:38 am
“We’ll just solve the problem with these magic beans.”
“There’s no such thing as magic beans.”
“Oh. So you’re saying we need more magic beans?”
“…”
– MrJM
Comment by MrJM Tuesday, Apr 28, 15 @ 9:38 am
” that retirement income tax is a legislative non-starter.”
So the folks who benefited from too-low taxes for their entire working careers get exempted from helping to pay it back. Because they might move away, and then have no continuing political influence, and/or because they vote at a higher rate and so have out-sized political influence.
Sounds like a set up for making bad policy decisions.
Comment by Chris Tuesday, Apr 28, 15 @ 9:39 am
Take the income tax back to 5% and add a few years to the reamortized pension debt. Taxing Retirement income over 100k adjusted annually should be doable.
Comment by Anonymous Tuesday, Apr 28, 15 @ 9:40 am
“Illinois politicians realize taxing retirement income will result in an out flow of retirees from the state.”
Will it? Retirees have, almost by definition, built quite a life in the state, with deep familial, social, and financial ties. I’m deeply ambivalent about taxing retirement income, but I’m not convinced that this is the best reason to oppose it.
Comment by Arsenal Tuesday, Apr 28, 15 @ 9:41 am
I wonder if a 5% income tax would replace the income tax on retirement income.
Also, for long term equity, a graduated income tax amendment should be passed.
Common sense stuff. Which means it probably won’t happen.
Comment by chi Tuesday, Apr 28, 15 @ 9:41 am
Illinois has been for many years spending, or promising to spend in the future, more than it has been taking in. I see that there is a need in Illinois for more revenue. However, is there also a need for some decrease in spending also?
Comment by Hit or Miss Tuesday, Apr 28, 15 @ 9:43 am
“Freeze spending for four years.”
And how would you do that? Through a statute, right? So you’re going to tie the legislature’s hands by…having the legislature tie it’s own hands. And then, 2 years later, when they REALLY want to buy a shiny new something, they’re going to be blocked by…a statute. That they can repeal.
Let’s live in the world of reality here, guys…
Comment by Arsenal Tuesday, Apr 28, 15 @ 9:43 am
===Taxing Retirement income over 100k adjusted annually should be doable. ===
You apparently have some reading comprehension issues.
Comment by Rich Miller Tuesday, Apr 28, 15 @ 9:44 am
The post states: “The amortization plan is a real problem because it immediately increases costs by half a billion dollars a year.” That is true, but the reamortization plan would eventually result in lower payments than is projected, just the total increase, FY 16 over FY 15: was $681.3 million according to the Commission on Government Forecasting and Accountability. I agree there are aspects of the plan that are politically difficult to foresee being implemented. Assuming the Supreme Court strikes down SB 1, and Governor Rauner’s proposal to amend the Constitution’s pension protection provision fails some type of reamortization of pension debt will have to be done regardless of how politically difficult it will be.
Comment by Rod Tuesday, Apr 28, 15 @ 9:45 am
===Freeze spending for four years.===
The squeeze has been on for longer than that. It’s tough to point to any new programmatic spending. Most of the temp tax money went to pensions, P-12, Medicaid and other natural growth (salaries, energy costs, etc). Pretty much all money for any “new” programs (NRI, for instance) came from existing programs.
Comment by Rich Miller Tuesday, Apr 28, 15 @ 9:47 am
Arsenal Check the numbers. Retirees have been leaving the state in large numbers. Taxing retirees income will increase the outflow, especially among those who can afford it, and those who would be taxed the most under this plan.
Comment by Anonymous Tuesday, Apr 28, 15 @ 9:48 am
if you don’t reamortize the pension debt (it is the debt not the pension system that is the issue) then the ramp just keeps on going up and becomes a much bigger problem. Perhaps increase income tax to 4.75% and then have that scale back to 4.50% once the increasing ramp payment equals the amortized pension payment. Ralph is correct that we have a revenue problem for the most part.
Comment by facts are stubborn things Tuesday, Apr 28, 15 @ 9:49 am
I’m fine with Points 2 & 3. I’m leery of the amortization proposal and I’m certain that voting to tax retirement income would not sit well with retirees (even if the rate is low) and lead to eventual heartburn for any GA member who voted for it. I still think the Republicans need to convince Governor Rauner to go along with the millionaire surcharge/tax. Why not? Then - if it doesn’t work out - they get to do the Jay-Z “dirt off your shoulder” and remind the voting public that they went for a compromise.
Comment by Team Sleep Tuesday, Apr 28, 15 @ 9:49 am
===the ramp just keeps on going up and becomes a much bigger problem===
Not really. It remains pretty constant as a percentage of annual state revenues. The problem is that state revenues dropped precipitously on January 1st. So a manageable problem (still a problem, but manageable) suddenly became an unmanageable problem.
Comment by Rich Miller Tuesday, Apr 28, 15 @ 9:52 am
More taxes is always the answer to Ralph Martire.
Let’s forget the fact that Illinois has had a reputation in recent times for being a high tax state (I refer to the combined burden of state, county and local taxes).
Keep feeding the beast and all will be well.
Comment by Upon Further Review Tuesday, Apr 28, 15 @ 9:55 am
=Check the numbers. Retirees have been leaving the state in large numbers.=
Give it 50-100 more years, when Illinois has a climate like Florida does now. Until then, taxes or no taxes, you won’t stop a certain percentage of people from moving away when they retire.
Comment by chi Tuesday, Apr 28, 15 @ 9:55 am
If you think there is resistance to retirees paying taxes on income over 100k, then just wait till you see the puffed out chests of outrage if/when those with incomes over 1 million are asked to pay a higher tax rate! Talk about threats to leave the state? We’ll all get an earful that pales in comparison to talk of taxing retirees.
Comment by AnonymousOne Tuesday, Apr 28, 15 @ 9:56 am
Perhaps the millionaire tax can be substituted for the retirement tax. Although that will still take a few years since that is a constitutional change. But it does seem popular among everyone except the millionaires whose voting numbers are much less than the retired.
Then they should look at business taxes and regulations. Reduce business costs through regulation reform but also reduce loopholes and subsidies for businesses.
With a reformed regulatory structure, perhaps they can grow business revenue enough to keep the ramp at its current level.
Comment by A Jack Tuesday, Apr 28, 15 @ 9:58 am
The reamortizing pension debt can be looked at but front end payments higher than the current payment is a non starter.
Perhaps the best thing that could be done to restore our fiscal house is passing a constitutional amendment to go to a progressive state income tax. The top rate in Wisconsin is 7.65%, Iowa is 8.98% and I believe Missouri is 6% for virtually all their taxpayers.
Comment by The Dude Abides Tuesday, Apr 28, 15 @ 10:00 am
I don’t always agree with Martire but, please, more adult conversations like this to address our problems.
Comment by Casual Observer Tuesday, Apr 28, 15 @ 10:00 am
Those who are in favor of taxing retirement income are probably not retired. While it’s true many retirees are quite well off, most are on fixed incomes that are not keeping up with inflation. Those of us who have sacrificed all our life to save for retirement are not eager to support those who refuse to be financially responsible.
Comment by Streator Curmudgeon Tuesday, Apr 28, 15 @ 10:08 am
Millionaire taxes and graduated taxes are just based on a combination of greed and irresponsibility. Supporters want the state services but just want someone else to foot the bill.
One of the big fiscal problems in states like New York and California is that revenues can wildly fluctuate when down times occur because such a high percentage of the state’s revenue comes from a relatively small number of individuals.
If we were starting from scratch I wouldn’t carve an exemption for retirement income. However we are starting from our present. You can grow an economy with a shrinking population and we shouldn’t be encouraging those who are already looking at major changes in their life look for a new address in another state.
Re amortize the pension debt
Comment by Downstate Illinois Tuesday, Apr 28, 15 @ 10:09 am
Off topic a bit:
Last evening, the guests on Chicago Tonight were 4 members of the IL legislature. Your column on Madigan became a topic when Carol Marin asked them why they think he might have stopped voting. Like us, they guessed at the answer but admitted no one knows.
Comment by Belle Tuesday, Apr 28, 15 @ 10:09 am
Martire is on the right track, as usual. Perhaps not all of the ideas are sound, but tax increase ideas are a heck of a lot better than making thousands of our most vulnerable suffer over a relative pittance of an income tax increase that we would have to pay. That we refuse to pay a little more so that our poorest residents can be buried instead of piling up in morgues, it’s pretty offensive to me.
I doubt very much that a modest income tax increase along with some service taxes will harm us. The recent income tax increase was much more beneficial than harmful. The unemployment rate dropped substantially during the tax increase period, plus we were paying our debts, as in fiscal responsibility.
Comment by Grandson of Man Tuesday, Apr 28, 15 @ 10:13 am
I wonder what his rate of return assumption is….
Comment by Shemp Tuesday, Apr 28, 15 @ 10:14 am
“So the folks who benefited from too-low taxes for their entire working careers get exempted from helping to pay it back. Because they might move away, and then have no continuing political influence, and/or because they vote at a higher rate and so have out-sized political influence.
Sounds like a set up for making bad policy decisions.”
And this is why I do not have a favorable view of the baby boom generation. They used the good public schools with inexpensive tuition and other public services their parents left them to get ahead in life. Once they came to power it became all about them and dismantled that very system that allowed them to get ahead in life, closing the door for those behind them. A generation of narcissists.
Comment by justthefacts Tuesday, Apr 28, 15 @ 10:20 am
UFR, that’s your standard talking point, but Gov. Rauner’s actions confirm that he believes Illinois has a revenue problem.
For FY15, Rauner just grabbed $1.3 billion in new revenue from sweeps to fix a $1.6 billion hole — and is on record saying he wanted to sweep more.
Rauner’s FY16 spending proposal relies on $3 billion+ in new revenues from grab backs from local governments and alleged “savings” in pensions and health costs.
Comment by Wordslinger Tuesday, Apr 28, 15 @ 10:20 am
===More taxes is always the answer to Ralph Martire.===
That’s because the Illinois deficit is caused by a lack of adequate revenue to cover essential programs. Why do you think the state borrowed so much from the pensions to cover program costs, if revenues were sufficient? Your Waste, Fraud and Abuse mantra is the only thing that’s bankrupt around here.
Comment by PublicServant Tuesday, Apr 28, 15 @ 10:20 am
Rep. Christian Mitchell’s hedge fund services tax (HB 670) seems like an interesting development in this Revenue debate. Does Governor Rauner have a position on a services tax that would impact financial companies?
Comment by Keep Refrigerated Tuesday, Apr 28, 15 @ 10:21 am
Martire’s proposals are a good starting point. For the record, I am a retiree who favors taxing retirement income–but of course I am just one person. But the larger point is that we should consider all the combinations that would solve the problem. One possibility would be an Adjusted Pension Debt Tax. The rate would be computed each year to pay the $7 billion payment on the amortized debt. While the amount would remain the same each year, the rate would go down as the population and economy grew. so the tax would be a smaller share of everybody’s income each year–just like a flat rate home mortgage.
Comment by jake Tuesday, Apr 28, 15 @ 10:22 am
“Arsenal Check the numbers. Retirees have been leaving the state in large numbers.”
Yes, and that’s while we’re NOT taxing retirement income. So, obviously, taxing retirement income is not the dispositive factor in their movement. You can’t really say, “We can’t pursue Policy X because Policy X will result in…something that’s already happening.”
Comment by Arsenal Tuesday, Apr 28, 15 @ 10:23 am
Taxing federally taxed retirement income (at the 5% rate) would bring in about $2 billion according to the Civic Federation. So at 3.75% it would be about $1.5 billion.
The Income Tax, for individuals (not corporate), brings in about $3.5 billion for every 1%.
So to make up for not taxing retirement income (assuming Matire’s 4.25% rate need to replace about $1.75 billion), would have to add another 0.5% income tax. Bringing the income tax up to about 4.75%.
Therein lies the problem. As Rich said, with the 5% income tax things were manageable. To make a significant dent in the 5% rate you need to broaden the income tax (the sales tax expansion to services doesn’t being in enough) to current exempt income.
Figure out the math, then pick the least offensive way to bring in the revenue.
Of course, things can’t get serious until the Supreme Court rules on pension reform so the GA has the ISC to CYA.
Comment by archimedes Tuesday, Apr 28, 15 @ 10:26 am
“Millionaire taxes and graduated taxes are just based on a combination of greed and irresponsibility. Supporters want the state services but just want someone else to foot the bill.”
Well, I suppose that if you’re going to come to the conclusion that “progressive taxation is greedy and irresponsible!” you have to start by ignoring the fact that “millionaires” use plenty of government services, too.
Comment by Arsenal Tuesday, Apr 28, 15 @ 10:28 am
Let’s give Ralph some credit for making a proposal that has some basis in math. The whole taxing matirement income (that would be it’s new name) won’t leave the batter’s box, but it’s a start. Everything that expands the solution pool should be welcome. I suspect some of these elements will be included in any ultimate solution.
The problem is that it doesn’t distribute burden equally and comprehensively. Whatever is ultimately agreed to will include more evenly distributed sacrifice. If this gets the conversation going; good for him.
Comment by A guy Tuesday, Apr 28, 15 @ 10:28 am
Remember most states tax some retirement income. So that limits the number of states that retirees can go to. Sure they can go to Texas or Florida, but so can working adults. So why are we worried about seniors moving to avoid income taxes but not the average citizen?
Comment by Salty Tuesday, Apr 28, 15 @ 10:29 am
Exhibit A in why we don’t have a fiscal “emergency” that required “police powers.”
Comment by walker Tuesday, Apr 28, 15 @ 10:31 am
Does anyone remember that the Governor says the income tax is going to be down at the end of his term, not up?
Comment by steve schnorf Tuesday, Apr 28, 15 @ 10:31 am
Good for Ralph Martire for putting out a proposal using real numbers. I’m a big fan of them and my biggest disappointment in Governor Rauner is that he didn’t use them in his FY16 budget proposal.
I tire of hearing the argument that, if taxes go up, there will be a mass exodus from the state. Why isn’t the converse true? Taxes went down and income taxes are lower than surrounding states, especially for people with higher incomes. Why isn’t there a mass influx of people due to that? And I know the follow up argument will default to “overall tax burden” with a variety of numbers from a variety of sources.
Comment by Earnest Tuesday, Apr 28, 15 @ 10:32 am
===hedge fund services tax (HB 670) seems like an interesting development in this Revenue debate===
He filed it on 4/20. It’s still in Rules. The deadline has passed.
It’s not a “development.”
Comment by Rich Miller Tuesday, Apr 28, 15 @ 10:33 am
Not all retirees oppose taxing retirement income, and an exemption of $100,000 seems generous. How can we retirees ask low income families to pay higher income taxes and still argue that ALL of our retirement income should be exempt? I realize there may be political issues, but there are also fairness and moral issues.
Comment by Retiree Tuesday, Apr 28, 15 @ 10:34 am
– The problem is that it doesn’t distribute burden equally and comprehensively.–
That makes sense to you? Retirement income isn’t taxed at all, while all other forms of income are.
If your goal is “equal and comprehensive” sharing of tax burden, it would seem that form of income should be taxed as well.
Comment by Wordslinger Tuesday, Apr 28, 15 @ 10:37 am
===Not all retirees oppose taxing retirement income===
That’s like saying “Not all Republicans oppose Barack Obama.”
C’mon.
Comment by Rich Miller Tuesday, Apr 28, 15 @ 10:37 am
“Retirees have been leaving the state in large numbers”
Yes, but will a tax on their income cause even more to move accelerating/expanding the numbers exponentially?
Comment by Keep Refrigerated Tuesday, Apr 28, 15 @ 10:37 am
I’ve heard a lot of old saws at the Capitol predicting a tax on retirement income. Like any normal person I wouldn’t be thrilled, but it’s an understandable. A vote on the tax would have to be a part of those end of session finale bills.
Comment by Norseman Tuesday, Apr 28, 15 @ 10:38 am
The average citizen with school age children and a good steady job is rather unlikely to move to another state because of the pittance of a half percent state tax increase. Which, by the way, is federally tax deductible so a half percent is less than that if you pay high federal taxes.
Comment by A Jack Tuesday, Apr 28, 15 @ 10:40 am
If the biggest obstacle to Martire’s plan is the immediate increase in the pension payments, then maybe Ralph should rework the numbers a bit to start out where we are now and adjust upward as state revenues increase. Yes, I know it would not be quite as actuarially sound as Ralph’s proposal but it might be more politically acceptable. Include a provision that resets the required amount in 5 or 10 years if the payments have not reached actuarial recommended levels by that point.
Gee, sounds like the 1995 ‘Edgar’ ramp, except it would be planned out better so there is less of a back-end / balloon surprise to it.
Comment by RNUG Tuesday, Apr 28, 15 @ 10:45 am
“Millionaire taxes and graduated taxes are just based on a combination of greed and irresponsibility.”
Keep pushing the idea that 64 percent of Illinois voters are greedy and irresponsible, and then just sit back and enjoy your inevitable electoral successes.
– MrJM
Comment by MrJM Tuesday, Apr 28, 15 @ 10:45 am
Agree with “Retired”, especially since I will NEVER be close to that $100,000 exemption…
Comment by downsate commissionr Tuesday, Apr 28, 15 @ 10:45 am
== Does anyone remember that the Governor says the income tax is going to be down at the end of his term, not up? ==
He said it, but that’s one more campaign promise Rauner has no control over.
Comment by RNUG Tuesday, Apr 28, 15 @ 10:46 am
===Not all retirees oppose taxing retirement income===
Rich, I believe a number of the better off retirees wouldn’t have a problem with a partial tax on retirement income. While I don’t want to pay more in taxes, I know I could pay some State income tax and not miss it much.
Comment by RNUG Tuesday, Apr 28, 15 @ 10:51 am
Re-amortize the pension debt, (at a lower interest rate).
Re-finance some or all of the 7-8% debt owed to the pension systems by selling bonds at the current lower rates. Use all the money from the pension bonds to pay the pension debt. No diversions.
Restore the income tax rate at 5%.
A phased in split in the employee pension contributions 50/50 with school districts and community colleges. The huge surplus of cash that College of DuPage brags about in their flyer makes me think they can afford it.
Add casinos, especially ones to compete with ones just across the state line.
These actions would go a long way toward balancing the state budget without the need for new taxes on services and retirement income.
Comment by DuPage Tuesday, Apr 28, 15 @ 10:53 am
===Wordslinger - Tuesday, Apr 28, 15 @ 10:37 am:
– The problem is that it doesn’t distribute burden equally and comprehensively.–
That makes sense to you? Retirement income isn’t taxed at all, while all other forms of income are.
If your goal is “equal and comprehensive” sharing of tax burden, it would seem that form of income should be taxed as well.====
The retirees are the only ones you see missing in this scenario?
Comment by A guy Tuesday, Apr 28, 15 @ 10:53 am
“Let’s forget the fact that Illinois has had a reputation in recent times for being a high tax state (I refer to the combined burden of state, county and local taxes).”
It’s an undeserved reputation. Ranked by total state and local tax collections per capita (in 2012, no newer data for local collections available) Illinois is 11th lowest; by own source collections (i.e., excluding federal transfers) Illinois is ranked 18th. So, it’s a below average per capita tax burden.
The more you know.
Federation of Tax Admnistrators
Comment by the Other Anonymous Tuesday, Apr 28, 15 @ 10:54 am
===hedge fund services tax (HB 670) seems like an interesting development in this Revenue debate===
He filed it on 4/20. It’s still in Rules. The deadline has passed.
It’s not a “development.”===
Yes, and it’s beyond me how anything good comes from giving a middle finger to Chicago’s financial services industry. Not that many businesses that could pack and move as easily as hedge fund managers.
Millionaire taxes are fools goold because they just create financial incentive for better accounting and management techniques, so not that many end up getting taxed. But the amount of regs on hedge funds makes that impossible, so they would legitimately move.
Comment by mcb Tuesday, Apr 28, 15 @ 10:55 am
DuPage - you forgot to legalize it…
Comment by Keep Refrigerated Tuesday, Apr 28, 15 @ 10:55 am
I’m still amazed that some of us who are not in the 1% feel that we should pitch in and pay more taxes but give a free pass to those in the 1%. If some of them can afford to donate millions toward their favorite cause (political or otherwise), why should they be sheltered from paying an extra percentage—money they’d probably not even notice? Ask someone making fractions of that to pay more and they will notice! What is the logic here? Talk about greed?!
Comment by AnonymousOne Tuesday, Apr 28, 15 @ 10:55 am
=== Does anyone remember that the Governor says the income tax is going to be down at the end of his term, not up? ===
Yes. Like Rauner, Blago made an ironclad commitment not to raise taxes. The smoke and mirrors he used to keep that promise is responsible for a lot of the fiscal problems we’re in now. I fear Rauner’s legacy will not be appreciably better.
Comment by Norseman Tuesday, Apr 28, 15 @ 10:56 am
The very simple fact is that BVR cannot agree to a revenue increase in Year I at least before the strike/lockout. He may not be able to agree after it is over
His presidential campaign is based on being the tougher tough guy….wimps who raise taxes do not cut it.
Comment by Anonin' Tuesday, Apr 28, 15 @ 11:06 am
I believe that we should find a way to get after money that cant leave the state. Say income/profits from Corporate run farms. You cant pick your piece of farm ground up and move it out of state can yah. I know its a pipe dream, but the Corporate owned/leased Farms should be treated like any other industry.
Comment by BlameBruceRauner Tuesday, Apr 28, 15 @ 11:07 am
===Illinois has had a reputation for being a high tax state===
No doubt many will broadcast and enjoy repeating that claim. Having lived and worked in four other states, the same statement was often made about them, including within Indiana. It’s political pap.
Illinois is actually in the middle, as we are in many metrics.
Comment by walker Tuesday, Apr 28, 15 @ 11:11 am
@Downstate Illinois, still trying to figure out why anyone downstate doesn’t want a graduated income tax.
Comment by From the 'Dale to HP Tuesday, Apr 28, 15 @ 11:14 am
The retirement tax was a non-starter for the majority of the retirees back in 2011.
We’ve got a wave of Boomers smashing into retirement everyday. Just as they had changed everything they have touched due to their sheer size, they can change this as well.
Keep pushing.
It is only right and fair that the generation which broke the bank when it comes to pensions, retirement and Social Security, pay for their damages.
Comment by VanillaMan Tuesday, Apr 28, 15 @ 11:18 am
I don’t see a lot of retirees packing up and departing just because their taxes increase by a modest amount. Many older people want to age in place because of things money can’t buy-family, long-term friends, attachment to a city or neighborhood.
The more affluent, though, could split their time among different tax venues such that they could avoid the Illinois state tax, though. Many affluent retirees have more than one home, so if you spend the requisite amount in Fla, say, enough to be a Fla taxpayer, you could still spend substantial time in Illinois. Really rich people do this already, I believe, and could the upper middle class be far behind?
Comment by Cassandra Tuesday, Apr 28, 15 @ 11:23 am
RNUG, I think he does. It would be very unlikely to raise taxes over his veto. The next downward move in the tax rate is automatic, so stopping it legislatively would subject it to veto also.
BTW, my back of the envelope math says Ralph Martire is looking at a lot more services subject to the sales tax than Rauiner proposed. And, if the taxing of retirement income is a no starter, that would mean the income tax number would have to be higher
Comment by Anonymous Tuesday, Apr 28, 15 @ 11:25 am
““millionaires” use plenty of government services, too”
Such as…? If you’re talking about the services “used” to keep the hoi polloi in check, and not putting the millionaires up against the wall, then sure.
But what else is there? It’s a serious question, as I don’t see myself using much in the way of ’state services’ apart from roads. NB: live and work *in* Chicago.
Comment by Chris Tuesday, Apr 28, 15 @ 11:29 am
I like most of it or at least the starting point of it. As far as taxing retirement income, almost all of my former co-workers had no problem with taxing retirement income over 100K, mostly because most didn’t even make 100K as a salary, let alone a pension. And we felt that those whose pensions were over 100K could easily absorb the tax. Just another perspective……
Comment by Former Merit Comp Slave Tuesday, Apr 28, 15 @ 11:32 am
Guy, you see many things and hear many voices that I do not.
Comment by Wordslinger Tuesday, Apr 28, 15 @ 11:33 am
=== While it’s true many retirees are quite well off, most are on fixed incomes that are not keeping up with inflation. ===
The proposal is to exempt the first $100,000 of annual income. Retirees making well over 100Gs are not exactly scrimping by on meager pensions.
Illinois is one of only two or three states that completely exempt retirement income from the income tax. In the other states that do tax some or all pensions and Social Security, have all the seniors moved away?
Comment by nona Tuesday, Apr 28, 15 @ 11:42 am
=== Wordslinger - Tuesday, Apr 28, 15 @ 11:33 am:
Guy, you see many things and hear many voices that I do not.===
We’ve sure reached a consensus on this.
Comment by A guy Tuesday, Apr 28, 15 @ 11:46 am
nona: “In the other states that do tax some or all pensions and Social Security, have all the seniors moved away?”
Of course not; it’s a canard on the same level as the “all the millionaires will leave if there is a millionaire surtax”. It’s phony baloney.
FMCS: “we felt that those whose pensions were over 100K could easily absorb the tax”
Yeah, of course, because, like everything else in this discussion, it’s “take someone else’s money, they got plenty, but I need mine”.
Comment by Chris Tuesday, Apr 28, 15 @ 11:48 am
I think the Governor holds a lot of cards in the process currently underway: governors always do. But the cards are worthless unless you’re willing to play them, or at least make people believe you’re willing to play them: this was frequently Governor Quinn’s problem.
Hands up from everyone who believes the current governor won’t be willing to play his cards. I don’t think we will see many hands, even from our bright commenters here. We have a different dynamic, perhaps unlike any most of us have ever seen before, and we are struggling to adjust to that new normal.
Comment by steve schnorf Tuesday, Apr 28, 15 @ 11:50 am
I fail to understand why people are vociferously against an income tax increase but are ok with the so-called “sweeps” which has now become the MO of the legislature. Isn’t the fact that we need the revenue from those sweeps an indirect admission of the fact we do actually have a tax increase…we are just refusing to label it as such? One would think that the legislature would back away from those sweeps after seeing what happened with the pension fund…sadly, it is business as usual.
Comment by Sam Tuesday, Apr 28, 15 @ 11:56 am
Ralph has a solution. It’s not perfect. But solutions seldom are.
Comment by veritas Tuesday, Apr 28, 15 @ 11:59 am
Steve, your analysis is sound. However, his willingness to play those cards doesn’t mean the State will be in better shape at the end of his tenure.
Comment by Norseman Tuesday, Apr 28, 15 @ 11:59 am
Do higher taxes lead to a mass exodus?
People who left the state in the last couple of years did not list high taxes as the reason. When Gallup surveyed them last year, only 8% said they were going because of tax (compared to 14% of New Yorkers). And that is despite the big income tax hike. https://capitolfax.com/2014/04/30/gallup-half-of-illinoisans-would-leave-if-they-could/
Comment by nona Tuesday, Apr 28, 15 @ 12:01 pm
Steve, I’m not sure what cards you’re talking about and to what end, but that budget proposal is about 10 percent out of whack between proposed spending and revenue. That would seem to be the ballgame this spring and summer, over everything else.
Comment by Wordslinger Tuesday, Apr 28, 15 @ 12:10 pm
I don’t think the issue with retirees leaving is whether or not they will actually leave. It’s whether they call their real Illinois house their home, or the condo in Florida. I talked to a lot of retirees in Springfield before the November election, several said they wished they could vote, but changed their address to Florida/Texas/etc for taxes. If their retirement is over 100k, I’d say it’s even more likely they could make the same move.
So then we still don’t have the money but have them living here and using services 9 months out of the year.
Comment by mcb Tuesday, Apr 28, 15 @ 12:16 pm
===@Downstate Illinois, still trying to figure out why anyone downstate doesn’t want a graduated income tax.===
Because our first response to fiscal issues isn’t to take someone else’s money(or more of it).
It always amazes me how some continue to preach the mantra of the rich getting a free pass. Even at a flat rate, the rich are putting far more dollars into the government coffers than lower incomes. I pay 3.75% of my salary, I don’t ask anyone else to pay a higher percentage then me because I think they can afford it, or won’t notice it.
Comment by mcb Tuesday, Apr 28, 15 @ 12:21 pm
The demographics say pretty clearly that the state has almost no alternative but to tax retirement income. Relative to the income of most young workers these days, that is where much of the wealth is, and as time goes by more and more wealth will be concentrated in retirement income. Cullerton’s proposal was very modest: Tax only income above $100K, which pretty much leaves alone the poor ol’ widow-ladies and their Social Security checks. Iowa only exempts the first $65K or thereabouts of retirement income, making Illinois still a great deal for retirees even if the Cullerton plan were implemented. Sooner or later, this is an issue these legislative heroes are going to have to address.
Comment by Skirmisher Tuesday, Apr 28, 15 @ 12:52 pm
The Other Anonymous 10:54:
The link you provided indicates Illinois to be the 11th highest, not lowest, and a good 20% above the national median.
Every study I’ve seen ranks Illinois among the worst, if not the worst, as far as per capita taxes as compared to the rest of the nation. Given our budget duress, debt and total tax burden as compared to the rest of the country, what makes you think raising taxes again is going to change anything? There has to be structural changes to our budget, and using some other states as a guide might be a good place to start.
Comment by The Whole Truth Tuesday, Apr 28, 15 @ 1:06 pm
—-there are fairness and moral issues—-
Exactly, if the legislature had not transferred money from pension funds to other non-retirement funds, made their scheduled fund payments and did not allow “pension holidays” there were not be a “pension crisis” today. To want to pin the lack of fairness and moral actions on the backs of retirees is totally absurd.
Comment by Buzzie Tuesday, Apr 28, 15 @ 1:07 pm
===The link you provided indicates Illinois to be the 11th highest, not lowest, and a good 20% above the national median.===
Correct.
===Given our budget duress, debt and total tax burden as compared to the rest of the country, what makes you think raising taxes again is going to change anything? ===
It’ll change the heck outta revenues.
Comment by Rich Miller Tuesday, Apr 28, 15 @ 1:13 pm
Agreed, it will increase revenues in the short term, but past experience indicates the long term is likely to result in even more spending and subsequent calls for even more taxes. Without a real handle on what we’re spending, especially as compared to other states, merely increasing revenues is most likely to be nothing more than throwing good money after bad.
Comment by The Whole Truth Tuesday, Apr 28, 15 @ 1:19 pm
Illinois already is the second highest state for rate of population exodus. Raising taxes and taxing retirement income can make us number one!
Comment by Anonymous Tuesday, Apr 28, 15 @ 1:34 pm
JTF 10:20 - You are correct. It amazes me how selfish my generation is after the Greatest Generation provided so well for us.
Count me in as a boomer with no objection to taxing retirement income.
Comment by Original Rambler Tuesday, Apr 28, 15 @ 1:58 pm
Illinois could imitate the City of Berwyn where there is a higher real estate transfer tax to those house sellers who are planning to leave the community.
Illinois: “Admissions free, you pay to get out.”
Comment by Upon Further Review Tuesday, Apr 28, 15 @ 2:14 pm
==There has to be structural changes to our budget==
And anybody that believes that those changes don’t have to involve revenues is smoking weed.
Comment by Demoralized Tuesday, Apr 28, 15 @ 2:27 pm
Chris
Get a life.
Millionaires don’t use services?
Hope you don’t fish, hunt, own a car, commute anywhere, drink clean water, breathe clean air, use sanitary sewers, address you own emergencies, handle all natural disaters. Its not about YOU CHRIS ITS about everyone. GROW up and understand what its like to be a human
Comment by BlameBruceRauner Tuesday, Apr 28, 15 @ 3:09 pm
At this point, as I’ve indicated in previous threads, more revenue does need to be part of the solution. The reason for that is we’re so far down the rabbit hole, cutting everything the amount it would need to be all at once is untenable. But continuing to do the same thing we have been doing without re-prioritizing spending, and, yes, some cuts, is just as untenable. Before more taxes make the state even more unwelcoming to stay in or move to, a plan (statute preferably) to delineate exactly where new revenues would go is needed. Along with that delineation, the plan to pay down debt and ultimately reduce Illinois tax burden to the national average has to be a component as well. We need to expand the tax base, not just more heavily tax existing taxpayers.
Admittedly, that’s a big step to undertake all at once. So maybe the “one step at a time” approach is more pragmatic. An incremental raise in revenues for an incremental cut in spending, no matter how small either may be.
Comment by The Whole Truth Tuesday, Apr 28, 15 @ 3:10 pm
I’m okay with taxing retirement income. $100,000 exemption is very nice. I’d settle for $50,000.
And, yes, that would then make me paying taxes on retirement income.
Two things:1. this would apply to all retirement income not just the pensiont income of retired state workers. 2. Exempt all W-2 income of anyone who is above 65 where that W-2 income is a small percentage of their total income. In, other words, if people are over 65 and working to make ends meet, help them out.
Comment by mythoughtis Tuesday, Apr 28, 15 @ 3:21 pm
+++++++++++++ - Rich Miller - Tuesday, Apr 28, 15 @ 9:44 am:
===Taxing Retirement income over 100k adjusted annually should be doable. ===
You apparently have some reading comprehension issues. +++++++++++++
………How about this:
Guided by principles of FAIRNESS, BROADENING AND PAIN SHARING
A. Increase the personal income tax rate from the current 3.75 pct to 4.75 pct.
B. Tax retirement income over $200K at the same 4.75 pct rate.
C. Lower the general sales tax rate by 0.5% BUT expand coverage to consumer services
D. Reamortize the pension debt from a 30-year payback to 43 years BUT dedicate the first $500 million annually from B & C to retiring (buying up) pension debt of whatever maturities the Treasurer deems most advisable.
Comment by zonz Tuesday, Apr 28, 15 @ 4:01 pm
one last thing:
Capture state tax from snowbirds by aggressively defining “Illinois resident” i.e., it’s one thing if a person moves to FL or TX full time, but a person who lives both in IL…AND…FL (or TX) should be an “Illinois resident” more or less by default
Comment by zonz Tuesday, Apr 28, 15 @ 4:12 pm
I am a retired public employee who, like others here, would favor taxing retirement income. This would be much more palatable than restructuring pensions. I would also not leave this state I am glad to call my home to play canasta in a retirement village in Arizona or Florida.
Comment by Jeanne Dough Tuesday, Apr 28, 15 @ 4:22 pm
Been gone all day,just got back and want to add my two cents worth on taxing retirement income. I am a long-time SURS retiree and I favor taxing my, and all, retirement income.
In addition to being a retiree, I have kids, grand kids and great grand kids living in Illinois and I can’t think of any reason my income should not be taxed but theirs should.
It seems to me that the most fair tax system would consider the amount of income one has and not the source of that income.
John Terwilliger
Comment by Anonymous Tuesday, Apr 28, 15 @ 7:40 pm
NOT taxing retirement income and instead passing the state financial problems onto our children and grandchildren should be the non-starter. Retired people should step up and pay their share of taxes. If instead they want to leave their families behind and move to another state, that is their choice to make. It would not be my choice.
Comment by Enviro Tuesday, Apr 28, 15 @ 8:10 pm
The biggest driver of our high tax burden is property taxes, the biggest driver of property taxes is schools. The reason the property taxes are high is the chronic underfunding by the State. There are no amount of unfunded mandates that can be eliminated, there can’t be a drastic enough reduction in the number of school districts or administrators to fix the funding from the State without a dramatic increase in revenues from the State to schools. There is no way with the current revenue that education funding can be substantially increased. Therefore the only way to cause any significant decrease in the tax burden is to replace property taxes as the primary funder of education and that requires an increase in State revenue, that’s the fact of the matter.
Comment by MyTwoCents Tuesday, Apr 28, 15 @ 8:40 pm
Why must we have the GA even talking about what income to tax? Just use Federal taxable income. That would allow you to lower the rate and it would be more progressive than the current system.
Comment by Excessively Rabid Tuesday, Apr 28, 15 @ 9:24 pm
All this talk about taxing retirement income, but little talk of the millionaire tax. Again balancing the budget on the backs of people with the least. That being said I would pay income tax on my retirement income, as long as it is a progressive tax. What is going to drive me out of this state is property taxes.
Comment by Pacman Wednesday, Apr 29, 15 @ 6:10 am
Some middle class retirees who offer to pay tax on their retirement income would apparently not be affected much by losing some of that to taxation. Not all retirees are so fortunate. Unlike the Tribbie articles and billboards, most public retirees are not earning so much that losing some of it wouldn’t sting (at a time in life where you can’t just go pick up a job to make up for it). It strikes me as interesting that those who are far more financially capable of paying more without hurting their lifestyle–the wealthy– are fighting to the death to not lose one more penny.
Comment by AnonymousOne Wednesday, Apr 29, 15 @ 7:36 am
Research shows that raising taxes does not result in out migration.
Comment by Yellow Dog Democrat Wednesday, Apr 29, 15 @ 8:13 am
To what do you attribute Illinois’s out migration?
Comment by The Whole Truth Wednesday, Apr 29, 15 @ 8:29 am
===To what do you attribute Illinois’s out migration?===
Well, weather, for one…
Comment by Oswego Willy Wednesday, Apr 29, 15 @ 8:30 am
I certainly agree the financial climate is a very large factor. And it’s man-made. Somehow, I doubt degrading it further will help.
Comment by The Whole Truth Wednesday, Apr 29, 15 @ 8:33 am
I meant sunshine, and warmth, but you already knew that…
Comment by Oswego Willy Wednesday, Apr 29, 15 @ 8:36 am
Sunshine and warmth must not be the whole story…plenty of other states with similar or worse weather than Illinois seem to not have the problem.
http://www.forbes.com/2010/06/04/migration-moving-wealthy-interactive-counties-map.html/
Comment by The Whole Truth Wednesday, Apr 29, 15 @ 8:44 am
This one’s not as detailed, but easier to read.
http://www.pewsocialtrends.org/2008/12/17/u-s-migration-flows/
Comment by The Whole Truth Wednesday, Apr 29, 15 @ 8:49 am
Are you guessing taxes, alone, lol
Comment by Oswego Willy Wednesday, Apr 29, 15 @ 8:50 am
Not at all. Taxes are but one hole in a leaky boat. But poking more and bigger holes only makes you sink faster. And the Law of Diminishing Returns applies to taxes too. We need to expand the tax base, not shrink it.
Comment by The Whole Truth Wednesday, Apr 29, 15 @ 8:57 am
“Easier said than done”
….and ….”scene”.
Comment by Oswego Willy Wednesday, Apr 29, 15 @ 8:59 am
Let’s try “And Cut”.
Comment by The Whole Truth Wednesday, Apr 29, 15 @ 9:01 am
“Guided by principles of FAIRNESS, BROADENING AND PAIN SHARING
…
B. Tax retirement income over $200K at the same 4.75 pct rate.”
That’s a joke, right? It’s “soak the rich”.
All y’all retirees benefited from the under taxation of income for your entire IL careers, and now you want to free-ride on fixing the problems that you turned a blind eye too.
And you wonder why people don’t have sympathy about cutting public pensions.
Comment by Chris Wednesday, Apr 29, 15 @ 10:47 am