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* They can say whatever they want. Unless and until they can locate some legislators willing to actually sponsor legislation to impose a state tax on retirement income, it ain’t even gonna be discussed except in news reporting and columns…
A second public policy organization is calling for Illinois to tax retirement income and expand the sales tax to some consumer services as part of a sweeping plan to fix the state’s fiscal woes.
The recommendations from nonpartisan budget watchdog Civic Federation come one week before new Gov. J.B. Pritzker is scheduled to present his first budget proposal to lawmakers. The Democratic governor backs legalizing and taxing recreational marijuana and sports gambling, as well as overhauling the state income tax system in two years. But he hasn’t endorsed taxing retirement income or gotten specific on taxing services.
In its annual “budget roadmap,” the Civic Federation’s Institute for Illinois’ Fiscal Sustainability says new taxes should only be considered as part of a multiyear plan that also limits state spending. It proposes limiting spending growth to 2.4 percent per year for five years.
The call to tax retirement income echoes a similar proposal last week from the Civic Committee of the Commercial Club of Chicago, which is made up of the city’s business elite. The Civic Federation has been pushing the idea for several years, though its recommendation hasn’t gained traction in Springfield.
Pritzker has said that sales taxes on services are regressive and he therefore doesn’t like them. Maybe we could see movement on that, but he defeated two Democratic primary opponents with the retirement income tax issue and I cannot see him ever flipping on that one.
Fiscally, it’s a good idea. Sound, even. Politically, it’s deader than a rock on a stump.
…Adding… Related…
* Illinois lawmakers flock to oppose retirement tax after proposal from business leaders
posted by Rich Miller
Wednesday, Feb 13, 19 @ 10:44 am
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I am retired and if it took some of the tax burden off my children, i would gladly sacrifice by paying more.
Comment by Blue Dog Dem Wednesday, Feb 13, 19 @ 10:53 am
I don’t expect Illinois to tax retirement income anytime soon. That being said, I think it is important to note that Michigan started taxing some retirement income in 2012 (passed in 2011). Republicans passed it. In the next election Democrats picked up seats but Republicans maintained control. I would imagine taxing retirement income in Michigan is as popular as it is here. So I would say this is an example showing it is doable politically. Whether Democrats want to wear the jacket for it is another story.
Comment by My Button is Broke... Wednesday, Feb 13, 19 @ 10:57 am
So irritating that this can’t go anywhere-I believe Illinois is the only state in area that doesn’t.
Comment by Chitownmom Wednesday, Feb 13, 19 @ 10:58 am
A sponsor is an important prerequisite.
,
Is this the legislative version of the old saying about “hearing a tree falling in the forest.”
Comment by Norseman Wednesday, Feb 13, 19 @ 11:01 am
Taxing Retirement may not be a bill
but guess what showed up
Again
I don’t think it’s a coincidence
It’s cover
“pursue reasonable savings in State employee salary increases and health insurance costs.”
Again hit the Public Servants
Really?
How will they or anyone
get anything done
With even the state workforce
We have now?
Let alone
doubling the health insurance costs
and cutting salaries.
No one will work for the state.
Why this horror again?
What is Pritzker trying to do?
JB needs to come out
immediately
to renounce plans of
Cutting public servants wages and benefits
and increasing health insurance costs.
This is starting to feel like……..
Perfidy
Comment by Honeybear Wednesday, Feb 13, 19 @ 11:03 am
There is probably no good way to spin it but some people have a lot of retirement income and if you have a huge exemption it would be fair. It would interesting way of taxing the rich again if say the exemption was over $100,000. Not sure what that would raise though.
Comment by Been There Wednesday, Feb 13, 19 @ 11:03 am
JB has made a promise on retirement income and he seems to intend to keep it. Unless you have a progressive income tax: taxing retirement income would apply to everyone. Taxing retirement income becomes a lot easier if Illinois gets a progressive income tax. Then , those who get big pensions who stay in state can be taxed. The problem then is you’d have an incentive to leave Illinois. JB and Mike Madigan understand this.
Comment by Steve Wednesday, Feb 13, 19 @ 11:05 am
I honestly have no idea why. Especially with the proposals bending over backward to exempt $50-80 thousand from any tax. If an individual is making $75k a year I don’t care if that’s a “fixed income”, they are doing well enough to contribute to the state.
Comment by Perrid Wednesday, Feb 13, 19 @ 11:06 am
This is the same tripe as “close state universites”…
There is not the stomach to tout, write a bill, get a sponsor, and vote for closing universities or tax retirement income.
Until you clear the political, the governmental aspects are just noise.
Comment by Oswego Willy Wednesday, Feb 13, 19 @ 11:06 am
===Pritzker has said that sales taxes on services are regressive===
He needs to rephrase that to say, “We need to modernize our sales tax to reflect a modern economy,” then look into a limited services tax on things like dry cleaning, haircuts, tax prep, landscaping, janitorial, printing, newspapers, etc.
“Regressive” is campaign talk. “Modern” is governing talk.
Comment by 47th Ward Wednesday, Feb 13, 19 @ 11:08 am
===Especially with the proposals bending over backward to exempt $50-80 thousand from any tax===
There’s real uncertainty about whether that would be constitutional.
Comment by Rich Miller Wednesday, Feb 13, 19 @ 11:12 am
47th….“Regressive” is campaign talk. “Modern” is governing talk.
Spot on.
The fact that we never stop campaigning is why governing is even harder. 47 states tax retirement income. And most states that have a sales tax, tax services.
Comment by Sideline Watcher Wednesday, Feb 13, 19 @ 11:15 am
As one soon to start drawing a pension I would be fine with it getting taxed. Small price to pay for an annual increase. Of course I was okay with taking furlough days too, something AFSCME could never tolerate.
Comment by Collinsville Kevin Wednesday, Feb 13, 19 @ 11:29 am
Some of the states that tax retirement income exempt social security earnings from the tax.
Comment by LTSW Wednesday, Feb 13, 19 @ 11:30 am
Mississippi has a progressive income tax yet exempts retirement income from taxation.
Let’s be Mississippi.
Comment by City Zen Wednesday, Feb 13, 19 @ 11:35 am
The only way taxing retirement income becomes even remotely doable is after a progressive income tax is in place. At that point, the idea of taxing retirement income over $100,000 or some other threshold becomes constitutional. Right now it’s likely not.
Comment by Roman Wednesday, Feb 13, 19 @ 11:47 am
JB should denounce. If he wants to tax the rich, go ahead and do it. Increase the rates on the rich and decrease on anyone below a certain Federal AGI.
Will it happen, no.
Comment by CPA Wednesday, Feb 13, 19 @ 11:54 am
I don’t think 47 states tax retirement income. Seven states don’t even have an income tax. Several others restrict taxes on various forms of retirement income.
Illinois is already a high tax state in total. While taxing retirement income would definitely help alleviate the abhorrent fiscal position the state finds itself in, treating it like ordinary income would only push more seniors out.
Even if JB changed his mind, would Madigan want to get saddled with that anchor come election time? Eventually it will happen, but probably not concurrent with everything else he wants to do.
Comment by SSL Wednesday, Feb 13, 19 @ 11:58 am
The revenue from taxing retirement income should be put into the pension funds.
As a (relatively) younger person, I’m not thrilled about paying more in taxes now and for the next few decades to cover pension costs in the future when the people getting the pension (public or private) don’t chip in.
It’s fair to stabilize the pension funds with revenue from people who benefit from the pension funds. And it’s totally constitutional.
Comment by Dan Johnson Wednesday, Feb 13, 19 @ 12:01 pm
Voters aged 50 and up are the majority in primary elections. No politician wants to anger that large voting group.
Comment by anon2 Wednesday, Feb 13, 19 @ 12:03 pm
Most non government pension plans are fixed and never grow from the amount you receive on day 1 of retirement example no cost of living but inflation over the years reduce the spending power of these fixed incomes. A state income tax equals pay cut.
Comment by jimk849 Wednesday, Feb 13, 19 @ 12:05 pm
@Been There 11:03 — taxing retirement income makes more sense in the context of a progressive income tax. If you can say, retirement income under $100K won’t be taxed, but retirement income will be taxed above that.
Comment by Anonymous Wednesday, Feb 13, 19 @ 12:07 pm
What’s “retirement income”? Only a pension? IRA withdrawal? Annuity payout? Social security? All of the above?
Comment by Fav human Wednesday, Feb 13, 19 @ 12:12 pm
–The only way taxing retirement income becomes even remotely doable is after a progressive income tax is in place.–
And with many bipartisan sponsors, including all leadership. And a governor explicitly proposing and pledging to sign.
So….. not in the foreseeable future.
Comment by wordslinger Wednesday, Feb 13, 19 @ 12:15 pm
SSL…you are right…my bad.
41 states have an income tax. 38 of those states tax retirement income. The only three states with an income tax to exempt retirement income are Illinois, Pennsylvania and Mississippi.
Comment by Sideline Watcher Wednesday, Feb 13, 19 @ 12:19 pm
As to a $50,000 - $80,000 exemption amount, I don’t think there is a serious problem. Article IX, Section 2, of the Illinois Constitution says:
“Exemptions, deductions, credits, refunds and other allowances shall be reasonable.”
Is there any argument that a $50,000 exemption is not reasonable that would not also say exempting all retirement income is not reasonable?
The only case law I know of that held an exemption amount was unconstitutional in a state with a similar provision in its constitution was a Michigan case involving exemptions that phased out as income increased. The court held that the phase-out was a disguised graduated tax scheme, and violated the state’s constitutional flat tax provision.
Comment by Whatever Wednesday, Feb 13, 19 @ 1:41 pm
===Is there any argument that a $50,000 exemption is not reasonable===
Compared to the exemption for everyone else? Yes.
Comment by Rich Miller Wednesday, Feb 13, 19 @ 1:57 pm
Madigan recognizes that taxing retirement income would be the third rail for his majority. Not going to happen anytime soon. The progressive approach has its own problems. Best to go to 6 percent on the flat tax and double the exemption which hasn’t been raised like forever. Bottom line is that State also needs to impose a freeze on employee wage increases for the near term
Comment by Sue Wednesday, Feb 13, 19 @ 2:08 pm
===taxing retirement income would be the third rail for his majority.===
No.
It’s the third rail for any of the 177 and a governor.
Why make it partisan, this observation you have? No one is sponsoring this anytime soon, that’s the point.
===State also needs to impose a freeze on employee wage increases for the near term===
You think that battle for step increases was… nothing?
Comment by Oswego Willy Wednesday, Feb 13, 19 @ 2:14 pm
==Compared to the exemption for everyone else? Yes. ==
Don’t they currently have an infinite exemption in the form of no income tax on this type of income?
Could the state give a credit for property taxes/rent paid by those collecting retiree benefits to try and hit those living in other states more than our own residents?
Comment by supplied_demand Wednesday, Feb 13, 19 @ 2:34 pm
===double the exemption which hasn’t been raised like forever===
2018: $2225
2017: $2175
2016: $2175
2015: $2150
It does (currently) adjust for inflation.
Comment by thechampaignlife Wednesday, Feb 13, 19 @ 2:37 pm
== Some of the states that tax retirement income exempt social security earnings from the tax. ==
True.
Now several questions for you: what are you going to do for the government employees, specifically teachers, who were not allowed to participate in Social Security? Even though they paid into SS at other jobs and are either fully or partially denied a SS benefit because of the offset rule? Or denied their deceased spouse’s SS benefit because of offset rules? And I believe some of the same questions apply to railroad pensions.
Comment by RNUG Wednesday, Feb 13, 19 @ 2:38 pm
I would like to point out again that we already partially tax retirement income. All Roth contributions are included in federal AGI with no line in the IL 1040 to deduct it. While traditional pension, SS, IRA, and 401k plans are deducted at the time of contribution and not taxed by Illinois at the time of withdrawal, Roth is taxed at the time of contribution in Illinois.
So, perhaps the compromise is that we will not tax retirement income, but we will tax retirement contributions. I.e., treat all accounts like Roth accounts for state income tax purposes. That taxes current workers, not retirees.
Comment by thechampaignlife Wednesday, Feb 13, 19 @ 2:38 pm
Taxing retirement income is really more of a mixed bag than most people are representing.
7 states have no income tax; 43 states do.
SS benefits are not taxed in 27 states (16 do).
12 states exempt pension income entirely for qualified individuals are Alaska, Florida, Illinois, Mississippi, Nevada, New Hampshire, Pennsylvania, South Dakota, Tennessee, Texas, Washington and Wyoming.
24 states exempt or provide a credit for a portion of pension income include: Alabama, Arkansas, Colorado, Delaware, Georgia, Hawaii, Iowa, Kentucky, Louisiana, Maine, Maryland, Michigan, Missouri, Montana, New Jersey, New Mexico, New York, Ohio, Oklahoma, Oregon, South Carolina, Utah, Virginia and Wisconsin.
14 states (and D.C.) where pension income is fully taxed, include Arizona, California, Connecticut, District of Columbia, Idaho, Indiana, Kansas, Massachusetts, Minnesota, Nebraska, North Carolina, North Dakota, Rhode Island, Vermont and West Virginia.
Source:
https://www.retirementliving.com/taxes-by-state
Comment by Anonymous Wednesday, Feb 13, 19 @ 2:47 pm
2:47pm was I
Comment by RNUG Wednesday, Feb 13, 19 @ 2:49 pm
- Blue Dog Dem - Wednesday, Feb 13, 19 @ 10:53 am:
I am retired and if it took some of the tax burden off my children, i would gladly sacrifice by paying more.
Talk is cheap. Specifically, in dollars. how much more? Then an honest discussion can begin.
Comment by Nonbeleiver Wednesday, Feb 13, 19 @ 3:03 pm
CC, IPI and other business groups want pensions taxed.
I suspect that this will affect them minimally- or at least they think that.
Any observations on this except for my speculation
Comment by Nonbeleiver Wednesday, Feb 13, 19 @ 3:05 pm
Those retirees who have good pensions will leave the state. And if they have higher incomes and high property taxes they will leave it even sooner.
They may or may not maintain a home in Illinois to come back to- particularly if they have grandchildren. But otherwise they will go to Florida, Texas etc.
Taxing retirement income on those who make more is a loser for the state and anyone with a lick of common sense knows that. the ones who might stay are lower income retirees: who tend to spend (less less sales taxes); lower additional investment income (thus less state income tax) and probably lower property taxes.
Interesting that groups such as the CC and IPI want to drive these people away in even bigger numbers.
Comment by Nonbeleiver Wednesday, Feb 13, 19 @ 3:27 pm
Tax the Rich- Tax the Rich and as N.Y. CT NJ all found out people leave. No argument Illinois needs more Revenue but it also needs spending discipline. Raise the flat tax to 6 percent increase the exemptions and move on. JB is gonna discover real fast his progressive agenda will hit the brick wall A/k/A pension funding
Comment by Sue Wednesday, Feb 13, 19 @ 3:45 pm
Raising the flat state income tax would help pay down the debt. However, a progressive state income tax would be more fair as a long term solution.
Comment by Enviro Wednesday, Feb 13, 19 @ 5:43 pm
Non. Obviously i 2ould like to see the numbers
But simple math. The flat tax i pay on other income sources. But unless the poor and middle classes see some tax relief. Nope .
Comment by Blue Dog Dem Wednesday, Feb 13, 19 @ 6:49 pm
== Those retirees who have good pensions will leave the state. … They may or may not maintain a home in Illinois to come back to- particularly if they have grandchildren. ==
If it was up to just the Mrs, we would already be living somewhere with milder Winters; not Texas or Florida because they get too hot in the summer.
Interesting bit … brother & sister-in-law lived in Austin area for many years; now have both their kids and grandkids back in Austin, but won’t move back because of the summer heat.
Comment by RNUG Wednesday, Feb 13, 19 @ 6:58 pm
So… Private Sector people Retire, stay IN STATE and will get to Pay Tax to pay for Retirement packages of Public Service workers who retire YOUNGER and have been granted generous pensions by Taxpayers,and many LEAVE Illinois to AZ and Florida.. Where Illinois taxpayer funds are then spent..I see..
Comment by Dave B Wednesday, Feb 20, 19 @ 11:31 am