Welch floats trying again on graduated tax—tied to pensions

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Illinois lawmakers probably ought to take another whack as passing a graduated income tax amendment but should specifically tie much of the proceeds to paying off old pension debt.

That was the suggestion today from the new speaker of the Illinois House, Emanuel “Chris” Welch, as he came under strong questioning about how the state should handle $144 billion in unfunded pension liability for state workers and educators.

In a webcast event hosted by the Economic Club of Chicago, the Hillside Democrat seemed to reject raising the retirement age, cutting benefits or otherwise reducing the payout to Tier One workers, those hired before 2011. They’re the source of the bulk of the $144 billion in unfunded liability

The Legislature passed a measure several years ago to do just that, but it was ruled unconstitutional by the Illinois Supreme Court. “I voted for it,” Welch said. "But, the court ruled ‘You can’t do that. It’s wrong,’" Welch said.

Given that, the state has to find the revenue to pay its debts, he argued. But voters clearly weren’t inclined to go along in November because they didn’t trust Springfield with a blank check, Welch said.

That could change if the Legislature again sent to voters, perhaps in time for the 2022 elections, a new proposed Constitutional amendment to allow a graduated tax that earmarked the money, Welch said, specifically referring to pensions.

Under Gov. J.B. Pritzker’s plan, only $200 million a year out of $3 billion in proceeds had been promised to pensions, though the governor said that figure could go up.

Welch did not say what share of a new amendment should be promised to pensions. But he did predict that given the state’s fiscal problems, the income tax issue isn’t going to disappear.

“If we don’t change (the current flat tax) . . . we’re going to be talking about this in another five years,” Welch said. Adopting a graduated tax like most other states have is “one of the structural changes we need.”

Welch also expressed general support for Pritzker’s proposal to close $932 million in “corporate tax loopholes.” After helping defeat the graduated tax amendment in November, the business community “needs to come to the table,” he said. But he stopped short of endorsing the entire package.

The governor’s proposal is “a good start,” he said. “Man of the things I agree with, some I may disagree with.”

You can expect Welch will be asked more about such things Friday, when he’s scheduled to appear at another webcast sponsored by Crain’s and the Lincoln Forum that I will moderate. 

via Crain’s Chicago Business https://ift.tt/1mywUHL

February 24, 2021 at 02:03PM

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