Illinois too chicken to talk about taxing retirement income

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Taxing high retirement income could be a part of the solution to Illinois’ financial woes, writes Andy Shaw of the BGA.

Follow @andyshawbga

Most of us don’t like to pay taxes, but it’s our legal and civic obligation in a democratic society.

It’s also galling in states like Illinois, where real estate, sales and gasoline taxes are among the highest in the country, and there’s too much waste, inefficiency and dishonesty in government to feel our money is being well spent.

But the beat goes on.

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Last year Cook County raised sales and hotel taxes, and the City of Chicago passed the largest properly tax in history.

Illinois lawmakers were outliers, letting a temporary income tax hike expire, so working families and businesses actually got a tax cut.

Good for us but bad for government because the billions in lost revenue dramatically increased the state budget deficit and the pile of unpaid bills.

It’s time to pay the piper, and new taxes will probably be part of any final budget deal.

In fact, last week’s bi-partisan proposal from rank-and-file legislators suggested raising income and sales taxes.

But off the table, apparently, is a logical but politically toxic suggestion: Tax the annual income of retirees above a certain level — say $50,000 or $75,000 or even higher.

Illinois is one of only three states with an income tax that exempts retirees, so why not consider it?

Because seniors vote in droves and influence elections.

Recently, the Better Government Association examined the issue in an investigation entitled “Age-Old Question. Time For a State Retirement Tax?”

Reader response was overwhelmingly negative and often accompanied by threats to move out of state. Here’s an edited sample of the reactions:

+ “Wisconsin here I come….”

+  “Really? Hit people on a fixed income AGAIN?”

+ “Everything but lower spending. Right???”

+ “No way! After they learn to manage money we can talk.”

+ “Illinois starts taxing pensions, Florida here I come.”

+  “Pass a tax hike and no one will retire here.”

Some folks were mad at the BGA for even raising the issue — questioning our watchdog sanity:

+ “Are you @#$%^& nuts even asking (the) question? They better keep their hands off of my retirement money.”

Tax aversion is natural, and the feedback echoes a recent survey by AARP of Illinois, which found 89 percent oppose a retirement tax and 60 percent say they’ll move out of state if it’s imposed.

Even so, respected civic groups aren’t saying “never” to a retirement tax, according to the BGA report.

The Civic Federation, Illinois Policy Institute and even AARP say it could be palatable, but only in a comprehensive budget deal that cuts wasteful spending, implements efficiencies and other government reforms, and addresses the pension crisis.

That makes sense.

It’s estimated a retirement tax could bring in up to $2 billion a year, real money in a state that’s broke and getting broker.

But seniors can chill because, as I said, it’s unlikely this year.

As an old dude who’d be whacked by the tax, I’m relieved.

As an old dude who worries about the mountain of debt we’re piling onto our children and grandchildren, I think it should at least be considered as part of an overall solution.

Lawmakers in 47 other states bit the bullet, faced the wrath of seniors and imposed a tax on retirement income.

Most are still around to talk about it.

But this is Illinois, a dystopian government Wonderland where a refusal to even consider the obvious is business as usual.

The Mad Hatter would love it.

Andy Shaw is President and CEO of the Better Government Association.


Follow Andy Shaw on Twitter: @andyshawbga

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