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* There are several ways to look at this new tax hike. You can, for instance, click here and check out the Illinois Policy Institute’s tax hike calculator. Just remember that if you deduct your state income taxes on your federal tax form you’ll have to lower that amount a bit more.
So, we now know how much this will cost you, personally as an individual. But what sort of impact will it have on the state economy as a whole? Let’s first look at the income tax hike revenue projections…
Individual: $4.453 billion
Corporate: $514 million
Total: $4.967 billion
* Let’s start with individuals. According to the Federal Reserve of St. Louis, which used US Bureau of Economic Analysis numbers, total personal income in Illinois last year was $673.983 billion.
So, the new tax will eat up 0.661 percent of total personal income in Illinois. Just for fun, add in the corporate tax projection and it’s 0.737 percent of total personal income (it wouldn’t be that high, but whatever).
* Also according to the Federal Reserve, Illinois’ 2016 Gross State Product was $791.608 billion.
So, the tax hike represents 0.627 percent of total Illinois GSP.
posted by Rich Miller
Wednesday, Jul 5, 17 @ 11:15 am
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So, a bit under 1% of our income will be siphoned from our checking accounts.
Comment by Anonymous Wednesday, Jul 5, 17 @ 11:20 am
So if the BIMP is used to pay off $8 billion in unpaid bills, it will inject more than 1% of GSP into the Illinois economy?
Comment by Markus Wednesday, Jul 5, 17 @ 11:24 am
Good numbers Rich, thanks.
Any idea where Illinois residences would rank among all states in total taxes paid per person.
I know that before the increase, Illinois was ranked 29th, even including property taxes.
Comment by WhoKnew Wednesday, Jul 5, 17 @ 11:25 am
===So, a bit under 1% of our income will be siphoned from our checking accounts.===
That kind of statement is a red herring. Without that %.627 public institutions, including k-12 education would have been gutted.
You’re also rounding by 38%. If a kid came home with a D would you consider it a bit under an A or a lot under an A?
“Just over half a percent” might be more accurate.
Comment by Anon Wednesday, Jul 5, 17 @ 11:26 am
I was a supporter of this budget/revenue but I still have an issue with it. This budget may solve the short term problem but we still have expenses that will soon be larger than our likely revenues. We have rising healthcare costs and a mandatory pension repayment plan that require increasing amounts and this new revenue package is not enough to put the state on a sustainable financial footing going forward given what we know about upcoming expenses. We just went through an awful lot of pain to (maybe? probably?) enact a half-measure tomorrow. Then what?
Comment by The Captain Wednesday, Jul 5, 17 @ 11:30 am
Rich,
Good math. Now read what Christina Romer (Obama’s economist) says happens to an economy when taxes are hiked 1% of GDP. I’ll save you time — It’s not pretty.
Comment by Lucci Wednesday, Jul 5, 17 @ 11:33 am
How does this budget help the hard working families of IL? How does this budget help the working poor? Math is non-negotiable. No one will get pressured into a bad deal.
Comment by Rocky Rosi Wednesday, Jul 5, 17 @ 11:36 am
Nah.
What we did was end a ruinous tax cut which gutted our state, threw our communities into catastrophe, gridlocked our governments, and destroyed our bond ratings.
If Rauner didn’t want to restore our income tax to its earlier rate, he needed to cut our government to fit the lowered tax rate. But he couldn’t do it. There wasn’t cuts large enough or beneficial to make. The expected waste, fraud and inefficiencies Rauner expected to pay for the tax cut wasn’t there. So Rauner thought he could starve the fat out of us.
After nearly three years, all the easy cuts have been done. There’s nothing left but easy rhetoric and ugliness.
The 2015 tax cut was a complete disaster, and now it is being fixed.
Next - we have to repair the damage Rauner created.
Comment by VanillaMan Wednesday, Jul 5, 17 @ 11:37 am
I agree with The Captain. This budget is not addressing so many outstanding bills. I believe in the Band-Aid method. Tell me all the bad news at once. Tell me where the money is going and how long it will take to get there. Put in place a realistic tax increase that will start paying off out back log of bills. Put a sunshine date on a part of the tax increase and continue with spending reform efforts. I am pretty sure that I will not be happy when the legislature comes back and says “oh by the way….!”
Comment by STILL WATERS Wednesday, Jul 5, 17 @ 11:43 am
===I’ll save you time===
I’ll save you time. It’s not 1 percent of GSP. It’s barely six tenths of one percent.
Comment by Rich Miller Wednesday, Jul 5, 17 @ 11:44 am
“Red lining” is the process of refusing to do business with someone because they live in a particular area.
Illinois is currently being red lined by developers and manufacturers across the nation. This budget does nothing to change that.
Comment by Downstate Wednesday, Jul 5, 17 @ 11:45 am
Don’ forget to exclude any income from pensions, Social Security and defined comp funds. That income tax rate is still 0 for all income levels in Illinois.
Comment by cassandra Wednesday, Jul 5, 17 @ 11:46 am
…Also, our past-due bills currently represent almost 2 percent of GSP.
Comment by Rich Miller Wednesday, Jul 5, 17 @ 11:46 am
=Good math. Now read what Christina Romer (Obama’s economist) says happens to an economy when taxes are hiked 1% of GDP. I’ll save you time — It’s not pretty.=
Well, you move closer to what has happened in Minnesota and farther from what happened to Kansas. That is a good thing.
And why is paying the bills bad?
Comment by JS Mill Wednesday, Jul 5, 17 @ 11:47 am
==How does this budget help the hard working families of IL?==
It keeps our jobs, schools, and charities open.
Comment by Arsenal Wednesday, Jul 5, 17 @ 11:48 am
**I’ll save you time. It’s not 1 percent of GSP. It’s barely six tenths of one percent.**
Also - Rich’s math doesn’t include the new and expanded tax credits which make that 6/10 of a percent even smaller.
Comment by JoeMaddon Wednesday, Jul 5, 17 @ 11:48 am
According to the IPI calculator I’d pay a crushing $32 extra per month. That’s it I’m uprooting my life and moving to Indiana.
Comment by Impasse Casualty Wednesday, Jul 5, 17 @ 11:48 am
So, it looks Rauner will come out a winner - override the veto and he can pin it all on the Dems. Unions gutted by SCOTUS this year, and income for the working class drops. Bravo Rauner.
Comment by Dr X Wednesday, Jul 5, 17 @ 11:49 am
According to the Fed’s website, the greater Chicago GDP was $640 billion in 2015.
So Greater Chicago makes up over 80% of Illinois’ GDP.
C’mon, downstate.
Comment by Matt P. Wednesday, Jul 5, 17 @ 11:55 am
I am fine with the increase and paying my share. The alternative is much worse.
Comment by illinoised Wednesday, Jul 5, 17 @ 11:56 am
No matter what the math game played, my Illinois taxes are going up 32% - Not good
Comment by Time to Leave Illinois Wednesday, Jul 5, 17 @ 11:58 am
== Don’ forget to exclude any income from pensions, Social Security and defined comp funds. ==
IDOR adjusts their estimates to allow for that. After all, they know the actual numbers for revenue.
Comment by RNUG Wednesday, Jul 5, 17 @ 11:59 am
But we can use real numbers such as this tax increase will cost me $1600 each year going forward. Seeing that most wages have been fairly stagnant and will possibly be in the future that is a pretty good chunk of change.
Comment by Arock Wednesday, Jul 5, 17 @ 12:00 pm
for those debating gdp and other metrics, IL was a low spending/low revenue state until the pension liability magnified year after year. When was the last time Republicans held the majority? 1995
Comment by Anonymous Wednesday, Jul 5, 17 @ 12:00 pm
===No matter what the math game played, my Illinois taxes are going up 32% - Not good===
Do you pay in “percentages” or do you pay in “dollars”?
Ugh.
Comment by Oswego Willy Wednesday, Jul 5, 17 @ 12:01 pm
I keep seeing so many threats of people moving to other states. Both here and on the comments sections of local papers.
Who’s buying all these houses with extremely motivated (allegedly) sellers?
How did people pay 5% from 2011-2014 if 4.95% will crush the state this year?
Comment by illini97 Wednesday, Jul 5, 17 @ 12:02 pm
What VM said.
It’s pretty obvious to me…
Comment by Loop Lady Wednesday, Jul 5, 17 @ 12:05 pm
And the unpaid bill and unfunded pension/healthcare liabilities are 47% of personal income, or something like 70 years worth of the tax increase. Good luck with that approach.
Comment by Wirepoints Wednesday, Jul 5, 17 @ 12:07 pm
==that is a pretty good chunk of change.==
It is. And it’s unfortunate. But there were no other viable options.
Comment by Demoralized Wednesday, Jul 5, 17 @ 12:07 pm
Funny you want to use percentages when you talk about a progressive tax but how many dollars does a person making $150,000 a year pay in comparison to someone making $50,000(at our current flat rate) if we want to talk dollars? Does the person that makes $150,000 pay more at a place of business for the same product or service that the lower paid person does? If not why should government be different?
Comment by Arock Wednesday, Jul 5, 17 @ 12:09 pm
For 3 years we have lost the most residents than any other state.
Comment by Anonymous Wednesday, Jul 5, 17 @ 12:10 pm
the penny example makes more sense to the average non hedge fund owners
Comment by Annonin' Wednesday, Jul 5, 17 @ 12:11 pm
There’s certainly ways that each side can spin this. Dems making it looks better, Reps making it look worse. At the end of the day, a typical family with a household income of $100,000 will certainly notice an extra $1000 going to the State. That’s a chunk of change.
To some, family ties and their job opportunities might be too strong for them to just up and leave in protest. For those on the fence, with family that already moved West or South, this could be their tipping point.
Illinois really needs to recognize that it has a population problem. It’s dangerous to ignore that. Detroit’s (and other industrial areas) population started to decline in the 1950’s. The damage wasn’t realized until it was already too late.
Comment by California Guy Wednesday, Jul 5, 17 @ 12:13 pm
===And the unpaid bill and unfunded pension/healthcare liabilities are 47% of personal income===
You’re comparing very long-term debt with annual income for effect.
Comment by Rich Miller Wednesday, Jul 5, 17 @ 12:14 pm
===a typical family with a household income of $100,000 will certainly notice an extra $1000 going to the State===
A typical family would notice a whole lot more if their typical kids couldn’t go to school in August or had to drop out of college or the typical parents lost their jobs because their employer wasn’t getting reimbursed by the state.
Comment by Rich Miller Wednesday, Jul 5, 17 @ 12:17 pm
I’d like to see one of the Raunerbots respond to illini97 12:02.
As to arock 12:00, you can start paying that $1600 this year going forward now or make it $3000 or so going forward in 2-3 years. Math demands that keeping the status quo is not an option.
Comment by Original Rambler Wednesday, Jul 5, 17 @ 12:21 pm
==If not why should government be different?==
Because government *is* different than purchasing a good or service from a private entity.
You want I should treat you like a moose, too, while we’re at it?
Comment by Arsenal Wednesday, Jul 5, 17 @ 12:23 pm
= Illinois is currently being red lined by developers and manufacturers across the nation. This budget does nothing to change that.=
That is such a load, I am not sure where to start. From personal experience more companies such as Siemens and Mercedes have avoided locating in Illinois due to the budget impass. Other companies like Amazon, P &G have been investing heavily in Illinois dispite the impass and tax structure. If you want to drive business out but education and workforce training programs. Oh, I forgot, that what Rauner and his Raunerites have done for the past two years.
Comment by Dr. Drew Wednesday, Jul 5, 17 @ 12:23 pm
–I’d like to see one of the Raunerbots respond to illini97 12:02.–
Thanks. As a follow up, what has been done with the money families kept in their pockets these past two years (1.25% percentage points of state income tax stayed in the bank account.)
Did the economy take off like a rocket? No?
Maybe it won’t sink like a boulder either.
Comment by illini97 Wednesday, Jul 5, 17 @ 12:24 pm
- Dr. Drew -
Meh.
Gov. Rauner claims “dozens” of businesses want to move here, “but”
Rauner has yet to name a single business or quote a single CEO to attach to that “but”
Meanwhile… Amazon…
Hmm.
Comment by Oswego Willy Wednesday, Jul 5, 17 @ 12:28 pm
Arock- you and I will be paying about the same increase. I make a good living in Illinois so I suspect you do too. I’m delighted that we have ( almost) a budget that funds schools and social services. I’m fine with the increase that ends two years of worry. Besides, while debt payments and some other cost send dollars out of the state, many of those additional tax dollars will be redistributed to service providers in Illinois who will spend those dollars right here. I’m a democrat (most of the time) but I’m very grateful for those 16 republicans who stepped up and did the right thing.
Comment by Depressed Wednesday, Jul 5, 17 @ 12:30 pm
I am one of those that was able to itemize on federal at the old rate of 5%. So I was paying less federal taxes before Rauner allowed that increase to expire.
I, for one, would much rather give more to the state and less to the federal government. Would you rather your hard earned money go for state services or building the Great Wall of Mexico?
Comment by A Jack Wednesday, Jul 5, 17 @ 12:30 pm
Illini97 - How did they pay their taxes when the rate was at 5%? With great difficulty - that’s why Rauner won with his radio ads playing the clip of Quinn saying he was going to make the tax permanent in November.
And I’m not a Raunerbot - I voted for Quinn and support the deal. But I won’t spin it for something it’s not.
Comment by lake county democrat Wednesday, Jul 5, 17 @ 12:38 pm
=== So, it looks Rauner will come out a winner - override the veto and he can pin it all on the Dems. ===
He also gets revenue to pay off bills and fund schools and social services, even though its revenue he opposed. So he gets to have his cake and eat it too.
Comment by anon2 Wednesday, Jul 5, 17 @ 12:38 pm
–As a follow up, what has been done with the money families kept in their pockets these past two years (1.25% percentage points of state income tax stayed in the bank account.)–
Maybe make up for wage stagflation? Or put it towards some of the local rising taxes (property, Cook County sales tax) and fees?
Seriously, supporters of the bill think telling the median income household in Illinois making $60K a year that they simply won’t miss the money is a winning one?
Comment by lake county democrat Wednesday, Jul 5, 17 @ 12:43 pm
When the income tax rate dropped by 1.25%, the “economy did not take off like a rocket.” Now that the rate is going up 1.20%, I doubt the economy “will sink like a stone,” either.
Comment by anon2 Wednesday, Jul 5, 17 @ 12:46 pm
One more unearned benefit for the Governor: now the state’s credit rating will improve — no thanks to him. He will nonetheless be taking credit for the improved rating in his campaign.
Comment by anon2 Wednesday, Jul 5, 17 @ 12:47 pm
= OW =
I know what the governor claims, we had heard those claims non stop since he started his campaign for governor. Simple fact is businesses are going to base investment on economics, I understand that. What many of the no tax troglodytes fail to acknowledge is the world has changed, heavy industry is not coming back to Illinois and our workforce needs to meet those changing needs. Without a high quality educational system, Illinois will not have a workforce in place to meet those needs and businesses will still bypass the state.
Comment by Dr. Drew Wednesday, Jul 5, 17 @ 12:48 pm
“How did people pay 5% from 2011-2014 if 4.95% will crush the state this year?”
Oh you mean the last hike that was supposed to fix all of this? Couple years from now, when faced with another hike you can pose the same asinine question.
Comment by Anonymous Wednesday, Jul 5, 17 @ 1:01 pm
==Oh you mean the last hike that was supposed to fix all of this? ==
The one that reduced the backlog of bills go from $9.9 billion to about $4.6 billion? Yeah, that one.
Comment by HangingOn Wednesday, Jul 5, 17 @ 1:09 pm
“Do you pay in “percentages” or do you pay in “dollars”?
Ugh.”
If you were making $50K last years, you had $1875 tax bill. This year you’re looking at $2475 tax bill. Anyone with even basic grasp of middle school math will tell you that that your tax bill increased 32%.
I suspect you think your target audience has room temperature iq.
Comment by Anonymous Wednesday, Jul 5, 17 @ 1:14 pm
==Oh you mean the last hike that was supposed to fix all of this?==
…and then expired. Probably shouldn’t leave that part out. It expired.
Comment by Arsenal Wednesday, Jul 5, 17 @ 1:20 pm
So by the Calculator my taxes will go up a grand total of $290 a year … in return for that I get our public schools to open our universities to stay open our social safety net to hopefully stay in business and it puts the over 20,000 construction workers back to work so they can pay taxes and continue the cycle of prosperity. Sounds like a heck of a deal to me.
Comment by Spliff Wednesday, Jul 5, 17 @ 1:21 pm
Given the debt owed businesses and contrary to the “burn it down” approach, it’s possible that repaying bills could a stimulus effect on the economy by fulfilling overdue receivables to businesses and people.
Comment by Deadbeat Conservative Wednesday, Jul 5, 17 @ 1:23 pm
===you were making $50K last years, you had $1875 tax bill. This year you’re looking at $2475 tax bill. Anyone with even basic grasp of middle school math will tell you that that your tax bill increased 32%.===
According to the link Rich Miller provided above, $50,000 in income with 2 dependents is $260-345 increase…
… that pays for the 2 dependents schools, maybe they’re older and keeps accreditation for their universities, or social services for family members that were stopped during the impasse…
===I suspect you think your target audience has room temperature iq.===
Once a state university closes, you ant just open it up. K-12 funding lost to districts mean programs that were once there may never return.
I guess you’re not a fan of paying bills, higher ed, social services…
High IQs means being a deadbeat?
Hmm.
Comment by Oswego Willy Wednesday, Jul 5, 17 @ 1:26 pm
“The one that reduced the backlog of bills go from $9.9 billion to about $4.6 billion? Yeah, that one.”
You do realize that is not a metric of fiscal solvency, right? If the backlog is being paid down via deficit spending, you will still end up in the same place. The reality of the situation is that the net deficit grew throughout the entire period of the “temporary” tax hike and inevitable the same will happen if this current tax hike is put in place. Simply put, Illinois spending consistently outpaces whatever revenues are brought it and the state will invariably end in a credit event.
http://midwest.chicagofedblogs.org/wp-content/uploads/2015/03/IGPA_graph1.png
Comment by Anonymous Wednesday, Jul 5, 17 @ 1:29 pm
Rich,
Your response to Wirepoints’ comment shows exactly what you don’t understand.
Illinois has a debt crisis, and this tax hike is addressing a cash-flow issue. And you’re cheerleading it. And it solves nothing but a political cash-flow issue. The debt crisis worsens by the day.
But glad to see another “tax-eater” (that’s you, Rich) is getting to work campaigning on behalf of the tax increase. Someone’s gotta do it.
Comment by Lucci Wednesday, Jul 5, 17 @ 1:50 pm
The mass exodus out of Illinois will almost certainly continue and likely get worse now.
Comment by Ron Wednesday, Jul 5, 17 @ 2:11 pm
Hi Ron. I hear your message, and now that we have put a tourniquet on the severed leg, perhaps we can talk about bipartisan reforms that might change our population trend. Things that BOTH sides think might help. But don’t count on Runer as a partner, because he has already been proven to be an all-or-nothing guy.
Comment by Simple Simon Wednesday, Jul 5, 17 @ 2:20 pm
A tax increase was needed, but far too little of it will be avaiable to reduce Illinois debt obligations and pensions. As a State we are still spending far more than we can afford. This is a stopgap which will do little to meet Illinois long term obligations. Still no real leadership.
Comment by downstate hack Wednesday, Jul 5, 17 @ 2:33 pm
Per WalletHub Illinois #9 tax burden state. Based on current income tax rate. With updated income tax rate increase the rank will increase.
Note: I moved from Illinois to Colorado (#35).
Comment by Mike Royko Wednesday, Jul 5, 17 @ 2:54 pm
Another note: pension reform is needed in order to have a medium to long term solution for illnois.
This is because the pensions are behind and falling further behind in funding versus commitments. The next recession will result in a drop in pension fund balances which will mean that more dollars will need to be diverted from general spending to cover pension fund payments. meaning another combination of cuts and increased revenues. reform = moving away from defined benefits to a 401k style system. it is the only solution for Illinois long term.
It is too bad that the state went as long as it did without a budget without the pension issue being addressed. I’ll leave it to those who follow more closely as to why this wasn’t the only issue on the table by the republican minority. seems like that would have been smarter than the laundry list.
Comment by Mike Royko Wednesday, Jul 5, 17 @ 3:02 pm
== pension reform is needed in order to have a medium to long term solution for illnois. ==
You do realize that:
a) you can’t forcibly change Tier 1, so you can’t “erase” the current debt; it has to be paid
b) Tier 2 pays for itself with no need for State contributions, and even pays a slight amount toward the Tier 1 debt
c) with a DC Tier 3 (it’s in the BIMP), any contribution / match by the State will cost more than Tier 2
d) if Tier 3 fails to pass the IRS “Safe Harbor” test, then all the non-coordinated members (primarily TRS) will have to also go into Social Security and either the school district or the State will have to also pay the employer portion of SS, costing even more than today.
Pick your poison; all the choices are not good.
Comment by RNUG Wednesday, Jul 5, 17 @ 3:21 pm
RNUG- agreed no easy choices. therefore action has been delayed. my understanding is a constitutional change ultimately will be required.
Comment by Mike Royko Wednesday, Jul 5, 17 @ 3:26 pm
Mike…your also must understand that federal contract law also applies. The benefits were earned under a contract. They cannot simply be wished away. The “other party”, meaning 250,000 annuitants and current employees, can sue for the benefits already earned. There is Literally no way to erase that debt. Let Tier 2 and the grim reaper take care of Tier 1, paying the ramp (or refinanced ramp) for the next while. In 20 years, the pearl clutching angst will be gone.
Comment by Simple Simon Wednesday, Jul 5, 17 @ 3:37 pm
== my understanding is a constitutional change ultimately will be required. ==
The problem is the Tier 1 “debt” from not making contributions. Changing the State Constitution won’t erase it (that whole Federal Contract Law issue that you can’t make retroactive changes except voluntarily).
The State can, and has, made pension changes effective for new hires.
So, really, if you can’t solve the Tier 1 “debt” problem, what’s the point of removing the pension clause? The clause isn’t the problem, the debt is.
In fact, the 1970 Con-Con minutes show the intended purpose of the clause was to try to ensure the State properly funding the pensions. But the drafters, like the courts, couldn’t order the Legislature to actually appropriate the money; it’s that darn Separation of Powers issue. Maybe we should repeal that instead … so the voters or judges can actually force the GA to fund things?
Comment by RNUG Wednesday, Jul 5, 17 @ 3:53 pm
Hi Simon,
I don’t share your optimism that Tier2 is the goose laying gold eggs. Tier 2 while on its own solid footing from a financial standpoint (perhaps not a regulatory one) will not be able to bail out Tier 1 system. The calculated Tier 2 surplus that could potentially be used to help Tier 1 is ~$6B over 30 years. The Tier 1 unfunded liabilty assuming 7.5% return, optimistic in the view of professional money managers, is ~$250B. While the grim reaper works for the next 20 years, probably more given life expectancy trends, more taxes and cuts to spending will be required to close the funding gap.
Illinois is #9 tax burden before the tax increase. My back of the envelope calculation is they will rise to #2 post tax increase. Politics aside, if you live in Illinois you should assess your families situation to see if relocating makes sense. This is not the last spending cut/tax increase.
Comment by Mike Royko Wednesday, Jul 5, 17 @ 4:07 pm
Defined contributions should be instituted ASAP for all new employees. No Guaranteed employer match should be included until the State Constitution is amended to eliminate the unfair protections only Illinois government workers receive. AKA, tax payer guaranteed retirement benefits and market returns.
Comment by Ron Wednesday, Jul 5, 17 @ 4:08 pm
RNUG - I agree with your summary. Let’s assume Tier 1 “debt” remains unsolved. As a result future budgets will likely have higher taxes and spending cuts.
Comment by Anonymous Wednesday, Jul 5, 17 @ 4:16 pm
“The benefits were earned under a contract.”
Yep, just more proof of how poorly run Illinois has been. Why would that be in a contract protected by the Constitution? No on in the private sector gets that.
Comment by Ron Wednesday, Jul 5, 17 @ 4:22 pm
Mike Royko, I completely agree. That’s why spending needs to be cut more.
Comment by Ron Wednesday, Jul 5, 17 @ 4:23 pm
Mike: I didn’t say that Tier 2 is the be-all of everything, but it helps (even if $6B is the correct number, that is not chump change). And since there is literally no other legal option, how else would you proceed?
And Ron, my impression of you from your posts is that you have strong opinions but are interested in facts. If Tier 2 helps pay down the Tier 1 debt, but a defined contribution plan does not, and actually costs more due to the state’s contribution and the likely need to also participate and contribute to Social Security (which would double the immediate cost to the state), how can you believe it is a solution? Is it worth that much money to you just to remove a guaranteed pension? Sorry, that goal is not worth billions to me.
Comment by Simple Simon Wednesday, Jul 5, 17 @ 4:29 pm
Tier 2 workers get 0 from the state toward retirement?
Comment by Ron Wednesday, Jul 5, 17 @ 4:34 pm
And fellas, the operative word is FEDERAL contract law, which covers every type of contract in the nation. You can sue anyone if they don’t fulfill their end of a contract. Really want that protection for your business dealings to go away just to eliminate pensions?
Comment by Simple Simon Wednesday, Jul 5, 17 @ 4:34 pm
Hi Ron,
Ron - It is possible to cut spending and that should be done. It probably won’t be until it has to. However no amount of cuts will resolve the $250B unfunded pension liability (the annual budget is only $36B) that will probably get worse not better since it is based on a 7.5% return. Spending will be cut but taxes will be raised. And more money borrowed for sure.
Comment by Mike Royko Wednesday, Jul 5, 17 @ 4:38 pm
@ Ron - “That’s why spending needs to be cut more.”
Please enumerate the additional cuts we need to make.
Comment by Marky Dee Wednesday, Jul 5, 17 @ 4:39 pm
Ron - Supposedly. The way it can go wrong is Tier 2 is still a defined benefit scheme so if the return assumptions don’t go as planned than there will be an unfunded liability that the state would be on the hook for. Right now the projections say it will run a surplus.
Comment by Mike Royko Wednesday, Jul 5, 17 @ 4:42 pm
In fact, the 1970 Con-Con minutes show the intended purpose of the clause was to try to ensure the State properly funding the pensions. But the drafters, like the courts, couldn’t order the Legislature to actually appropriate the money; it’s that darn Separation of Powers issue. Maybe we should repeal that instead … so the voters or judges can actually force the GA to fund things?”
Pure lunacy, Constitutions should not even discuss government employee benefits. Not a singe word.
Comment by Ron Wednesday, Jul 5, 17 @ 4:46 pm
Marky Dee, 10% across the board. My family now has to cut spending/savings in order to pay for increased taxes.
Comment by Ron Wednesday, Jul 5, 17 @ 4:48 pm
Ron - I’m always in favor of lower spending however Illinois is a low spending state already, ~$5000 per capita in a normal year when bills are paid. Which is in the bottom half of states.
Comment by Mike Royko Wednesday, Jul 5, 17 @ 4:49 pm
Does that include local government spending? Seems like something is off.
Comment by Ron Wednesday, Jul 5, 17 @ 4:55 pm
Ron:
There were across the board cuts. Some got 5%. Some got 10%. You should probably review the budget before assuming things.
Comment by Demoralized Wednesday, Jul 5, 17 @ 4:55 pm
Ron - That is just the state budget.
Comment by Mike Royko Wednesday, Jul 5, 17 @ 4:58 pm
At least across-the-board cuts are legal, and a real potential solution. Didn’t we see yesterday that cuts averaged more than 7%? And even with that large of a cut, tax increases were needed. 20% or more would have been needed to avoid the tax increase, and not a single politician suggested anything specific because the devastation would have been worse than the tax increase.
BTW, there ARE legal ways to reduce projected pensions, such as pay cuts (where allowed or negotiated), headcount decreases, pay freeze, etc. But no one is suggesting those due to the limited effects, cuts to public services (we already have the lowest per capita state employee ratio), labor wars, and similar things. But at least those are legal.
Comment by Simple Simon Wednesday, Jul 5, 17 @ 5:15 pm
Mike, the tax burdens you referenced are state and local so you are comparing only state spending to state and local tax burden.
Comment by Ron Wednesday, Jul 5, 17 @ 5:25 pm
Every Tier 1 worker should have his/her salary frozen unless in order to get that pension.
Comment by Ron Wednesday, Jul 5, 17 @ 5:26 pm
10% cut in spending is better than 7%
Comment by Ron Wednesday, Jul 5, 17 @ 5:27 pm
Ron - Thx for the fact check. I used the following which I believe is state spending only. http://www.kff.org/other/state-indicator/per-capita-state-spending/?currentTimeframe=0&sortModel=%7B%22colId%22:%22Per%20Capita%20State%20Spending%22,%22sort%22:%22desc%22%7D
Comment by Mike Royko Wednesday, Jul 5, 17 @ 5:36 pm
Hi Ron. You are free to demand that your legislator cut the budget more now or later.
But think like a lawyer before you start treating employees differently for no reason. Firing Tier 1s or freezing just their salaries just because they have a constitutionally protected benefit is fodder for ambulance chasers. The state would get sued into oblivion, and rightly so. Stick with legal things.
Comment by Simple Simon Wednesday, Jul 5, 17 @ 5:47 pm
Ok, salary freezes and layoffs all around.
Comment by Anonymous Wednesday, Jul 5, 17 @ 6:03 pm
Anon 6:03 Ok, salary freezes and layoffs all around”
Well, at least that may be legal
I prefer people saying this to many of the other clearly illegal that seem to get traction among the untutored. But wonder why no politician has proposed it? Imagine if your wait at the DMV is 25% longer, or the staff are even less helpful because none of them have worked there longer than the average job at McDonalds. Same as for those taking care of your loved ones, planning your road repairs, giving you tax advice, etc.
Comment by Simple Simon Wednesday, Jul 5, 17 @ 7:07 pm
I refer you to the Tax Foundation website on personal tax rates: https://taxfoundation.org/state-individual-income-tax-rates-and-brackets-2016/.
You will see the following rates for 2016:
Missouri: 6.0%
Iowa: 8.98%
Wisconsin: 7.65%
Kentucky: 6.0%
Illinois: 3.75% (maybe 4.95%)
Indiana: 3.3% + County Income Tax = T.I.T. over 5%
Even with the tax increase to 4.95%, the Illinois personal income tax rate is exceeded by every other neighboring state except Indiana.
If you would like to talk about corporate tax rates, please visit the Tax Foundation site again:
https://taxfoundation.org/state-corporate-income-tax-rates-brackets-2017/
Indiana’s 3.3 income tax is deceptive. The State of Indiana collects a county income tax which is passed through to fund local costs like county sheriffs, fire districts, local road maintenance and K- 12 schools. Indiana income tax is more than 5%.
Comment by DoTheMathPasstheTax Wednesday, Jul 5, 17 @ 7:30 pm
DoTheMathPasstheTax - And what do you get when you add property tax to the analysis?
https://wallethub.com/edu/states-with-highest-lowest-tax-burden/20494/
I have a nice house in Colorado. And pay a flat 4.6% state income tax. If I moved to Illinois I would pay $17,500 more in taxes - driven by the prop tax (it is really nice). My sister’s family relocated to Colorado from Illinois. Husband is in aerospace and transferred with Northrop. Got a nicer bigger house with substantially less taxes and more take home pay as a result. So for them the relocation resulted in higher quality of life. Maybe not for everyone will it work the same but everyone should do the analysis. An extra $1,000 per month in tax savings. Think about it.
Comment by Mike Royko Wednesday, Jul 5, 17 @ 8:16 pm
== Constitutions should not even discuss government employee benefits. Not a singe word. ==
The voters disagreed with you.
Comment by RNUG Wednesday, Jul 5, 17 @ 8:51 pm
Salary freezes and layoffs will not erase the pension debt. Pension is based the highest 10 years of earnings which is already considered by actuaries when the calculate how much the state needs to pay to catch up for missed payments.
If you studied how the pension actually is accrued and paid out, you would realize that it would be to the state’s benefit to entice Tier one people to work till age 80. They would die while still working and the state would owe nothing for their contribution. However, right now people are jumping ship as soon as possi
ble because of wage freezes and threats of higher insurance. So truly Rauner is making the pension problem worse.
Comment by A Jack Wednesday, Jul 5, 17 @ 8:57 pm
Lucci (at 11:33 am),
I did read what the Romers said about hiking taxes 1 percent of GDP. Ignoring methodology for now and just accepting them wholesale, I think it’s clear we can call the current tax hike “deficit driven.” Here’s what they say about that: “Panel D shows that the point estimates for the effect of a deficit-driven tax increase of one percent of GDP on GDP *are consistently positive*.” This obviously make them uncomfortable, since they then warn “there are too few tax changes of this type for the effects to be estimated precisely.” Max impact is GDP increase of 2.48 percent, and they settle at “tax increases to reduce an inherited deficit may be less costly than other tax increases.” (787, and note their footnote)
If you don’t find that pretty, maybe you’d settle for handsome?
Their paper is here: http://eml.berkeley.edu//~dromer/papers/RomerandRomerAERJune2010.pdf
Comment by Harold's Left-wing Dinner Wednesday, Jul 5, 17 @ 9:42 pm
A Jackj:
Not in my agency. It is highest 4 (typically last 4). 10 seems really restrictive and punitive, are you sure about that?
Comment by Jibba Wednesday, Jul 5, 17 @ 9:45 pm
-A Jack-,
A bit off there.
The pensions for most groups are based on the average of the highest 48 consecutive months (4 years) during the last 120 months (10 years), the Final Average Compensation (FAC), which is then multiplied by the percentage resulting from the years of service multiplied by the specified percentage per year. Again, in most cases, it is limited to a maximum percentage if you work enough years to max out (most employees don’t).
In some cases, the FAC is defined as the salary on the last day or the salary the last year.
And the State would owe the survivor(s) something.
In the case of a spouse, they would receive 1/2 of the retiree’s benefit and (for 20 year SERS/SURS), the health insurance benefit. If their are minor kids, there would be an additional amount. And a few other small payments, like the $1,000 death benefit and $5,000 life insurance.
If they are still working for the State when they die, in addition to the above, all employee payments are refunded.
You are right about Rauner’s driving people into earlier retirement is making it worse.
Comment by RNUG Wednesday, Jul 5, 17 @ 9:47 pm