AARP, senior groups stump for graduated tax, address retirement income claims

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SPRINGFIELD — A group of retirees organized through the senior advocacy group AARP held a virtual news conference Wednesday to express support for a graduated tax constitutional amendment and opposition to a tax on retirement income — two things that they note are mutually exclusive.

Many of the speakers, which included a former state director of the Department on Aging, took direct aim at recent claims by opponents of the tax amendment. Illinois is one of 12 states that do not tax retirement income. Of those 12, nine do not levy income taxes at all.

“The fair tax amendment would also protect our retirement income,” Chicagoan Carmen Betances, a member of the Jane Addams Seniors in Action, said at the news conference. “Illinois is one of the few states that does not tax retirement income. The fair tax will not change that. In order to protect retirement income in Illinois, we need more revenue to keep us afloat.”

The “fair tax” is a name proponents, including Gov. J.B. Pritzker, have given to the graduated tax constitutional amendment proposal. That measure, which will appear on the Nov. 3 ballot, would amend the state’s constitution to remove the requirement that any income tax be levied at a flat rate equally across all levels of income. If approved by voters, the amendment would allow lawmakers to impose different tax rates on varying levels of income.

Should the amendment pass, a rate structure that has already been approved by lawmakers would take effect in January. It would scrap the current 4.95% flat tax, creating six tax brackets for varying levels of income ranging from 4.75% under $10,000 to 7.99% above $750,000 for single filers.

Those earning more than $250,000 annually would see rates increased under the structure, while those earning less than that amount would pay slightly less or the same under the new tax system compared to the current flat tax structure.

In estimates released prior to the COVID-19 pandemic, Pritzker’s office said it expects the approved graduated tax rate structure to bring in about $3.4 billion in state revenue once it is in place for a full fiscal year.

Speakers at the news conference Wednesday said state government has ongoing budget deficits in the billions of dollars, especially as revenues plummet amid the COVID-19 pandemic, and the graduated tax rates approved by lawmakers are one way to raise revenues without taxing middle income earners or retirement incomes.

Pritzker has estimated the budget shortfall for the current fiscal year at $6.2 billion dollars. Without the graduated tax, which would only be in effect for half of the fiscal year, the shortfall could reach $7.4 billion, he said in April.

“If Illinois doesn’t find a way to fix this budget crisis with steps in the right direction, such as passing the graduated income tax, that’s when state lawmakers may be forced to consider adding a retirement income tax or more drastic spending cuts,” Charles Johnson, AARP Illinois volunteer and former Director of the Illinois Department on Aging, said at the news conference.

Think tank’s lawsuit takes aim at Illinois graduated tax ballot language

Opponents of the amendment have seized on a June comment by Treasurer Michael Frerichs, a Democrat, who said at a local chamber of commerce event, “One thing a progressive tax would do is make clear you can have graduated rates when you are taxing retirement income … And, I think that’s something that’s worth discussion.”

Frerichs called a news conference this week to address the statement, but abruptly canceled it, instead issuing a release saying he is against taxing retirement income.

While opponents have argued that allowing different tax rates on different levels of income would open the door for a future tax on high-dollar amount retirement incomes, the actual wording of the amendment does not create a retirement tax and does not make it any easier for the state to levy one.

Pritzker said in a separate news conference Wednesday he was opposed to taxing retirement income.

“I want to preserve the ban on retirement taxes, and I stand with all democrats opposed to raising retirement taxes,” he said. “But the people who are opposed to the fair tax want to put the burden on people who can’t afford it. I want to put the burden on the people who can most afford it. And that’s our millionaires and billionaires in Illinois.”

Opponents, however, have argued that even the $3.4 billion from the graduated tax would not fill the state’s budget holes, meaning further increases would be needed in the future and rates could be adjusted. Opponents argue more structural spending and pension reforms are needed before taxpayers are tapped for more revenue.

The amendment does not change the simple majority vote threshold needed from lawmakers to raise taxes in Illinois, but opponents argue by allowing lawmakers to set tax rates for smaller sectors of the population at any one time, it makes it a politically easier move for future General Assemblies.

On Sept. 24, Lt. Gov. Juliana Stratton said lawmakers “will be forced to consider raising income taxes on all Illinois residents by at least 20%, regardless of their level of income” if the graduated income tax fails. That would push the current tax rate to about 6%.

The Illinois Republican party quickly issued a statement following those remarks, calling them a “scare tactic” that will not sway Illinois voters.

A coalition led by the Illinois Chamber of Commerce, the Illinois Farm Bureau and National Federation of Independent Business has been growing in opposition to the amendment since the beginning of the year, and on Wednesday they announced 40 new members opposing the tax, including 27 local chambers of commerce.

The approved rates also raise the corporate tax rate from 7% to 7.99%, and the Vote No on the Progressive Tax Constitutional Amendment coalition argues that, amid the COVID-19 pandemic and associated economic restrictions, now is not the time to raise corporate taxes.

“Like the rest of small businesses, our auto dealers are struggling to recover from major losses due to the COVID-19 pandemic,” Illinois Automobile Dealers Association Director of Government Affairs Joe McMahon said in a news release. “Now is the worst possible time to increase taxes on our businesses that are fighting to keep their doors open and their teams employed.”

Proponents, however, point out that small businesses earning less than $250,000 per year will see taxes lowered if they are pass-through entities such as S-corporations or sole proprietorships.

The graduated income tax will need support from 60% of those voting on the ballot question or a majority vote of the total votes cast in the election in order to pass.

Region: Northern,Region: Kankakee,News

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October 7, 2020 at 06:19PM

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