He said he doesn’t have a position on that right now, but he should. And that position–as with all other candidates–is that all retirement income should be taxed by Illinois. It is, after all, taxed by the federal government. Allowing even wealthy Illinois retirees escape the tax is a cynical and blatant appeal to seniors who tend to vote in higher numbers and who tend to be Republican. (Other GOP gubernatorial candidates are not inclined to tax retirement income.)
With Illinois heading into fiscal insolvency, if not already there, there’s no reason that pension income–including social security and military pensions–should be exempt. If the state wasn’t in such dire financial straits, I might think differently. Many other states also exempt retirement income, but their finances aren’t in the toilet, like Illinois’. And a major reason that Illinois’ finances are possibly the worst in the Union are the public pension benefits that are sucking the state treasury dry.
According to about.com:
Out of all 41 states with personal income taxes, 37 states have some type of exemption for retirement income. However, each state has a different mix of income tax breaks for retirees. Most states exempt certain types of retirement income, but tax others. [Continue reading here for more details.]
In 2011, Senate President John Cullerton, a Democrat, proposed taxing retirement income, and as far as I know, the idea hasn’t gone anywhere since. As the story explains, here is the impact of the possible pension taxation scenarios:
In 2008, Illinois taxpayers received $37.3 billion in retirement income, including pensions, retirement annuities and Social Security, according to the nonpartisan Commission on Government Forecasting and Accountability. If taxed at 5 percent, that amount of retirement income would generate $1.9 billion. That figure would drop to $1.5 billion if Social Security income is not taxed, the commission’s calculations showed.
Revenues would drop dramatically if only the highest retirement incomes were taxed. For example, imposing the tax on everything over $50,000 in pension income would generate an additional $276 million. Taxing everything over $100,000 in pension income would raise just $70 million, said Sue Hofer, spokeswoman for the Illinois Department of Revenue.
Before you rev up your nasty mail, accusing me of hating seniors and “how would I like to pay the tax if I were a senior?” you should know that I’m 72, and I, too, would have to pay the increased taxes.
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