Pritzker revenue director sponsored bill to tax retirement income
Taxing retirement income is not a new idea to Illinois politicians, but denying they want to tax seniors is new since that part of the “fair tax” plan slipped out.
As supporters of Gov. J.B. Pritzker’s progressive income tax amendment continue to claim they will not impose a retirement tax, their past actions show the opposite – the “fair tax” is the path to a retirement tax.
Pritzker’s own revenue director once sponsored a bill that would have created a retirement tax. Illinois Department of Revenue Director David Harris, a former Republican state lawmaker from Arlington Heights, sponsored House Bill 3055 in 2017 shortly before retiring as a state lawmaker.
The bill would have imposed a tax on retirement income over $75,000 for those under 65 and on income over $100,000 for those over 65. The bill was referred to the House Rules Committee and never got a hearing.
Harris is not the first member of the executive branch to float the idea of a retirement tax. State Treasurer Michael Frerichs confirmed at an event in June that passing the progressive income tax would open the door to taxing retirement.
“One thing a progressive tax would do is make clear you can have graduated rates when you are taxing retirement income,” he said while speaking at an event hosted by the Des Plaines Chamber of Commerce. “And, I think that’s something that’s worth discussion.”
According to the Daily Herald, Frerichs said he knows people who receive annual pensions over $100,000 but pay no state income taxes. He said under the flat tax there is no way to differentiate between retirees who take home hundreds of thousands from those who get little.
If voters on Nov. 3 remove the Illinois Constitution’s flat tax protection, state lawmakers will no longer need to treat everyone the same. With a simple majority vote, they can declare which income groups they want to target to get new taxes started, then lower the amounts until they get the revenue they want. Those wants can be great for a group that failed to balance a budget for 20 years and has run up $140 billion in pension debt.
The definition of “rich retirees” is fluid. Retirement taxes even have been discussed for those making $15,000.
Former Chicago Mayor Rahm Emanuel proposed taxing retirees with incomes over $100,000 last year, while the Civic Committee of the Commercial Club of Chicago proposed taxing retirement income over $15,000 per year.
The Chicago Sun-Times editorial board even tied the two together, writing, “Pritzker’s progressive income tax plan can set the stage for far greater tax fairness. Next, that tax should be expanded to include the highest retirement incomes.”
Former Democratic gubernatorial candidate and former state Sen. Daniel Biss also agreed with Frerichs’ position that a progressive tax is needed in order for Illinois to tax retirement income.
“I would only consider taxing retirement income once we’ve amended the Illinois Constitution to allow for a progressive income tax so that we tax retirement income of wealthier Illinoisans rather than burden middle-class Illinoisans,” Biss said.
One of Illinois’ few bright spots in its tax policies compared to other states is the lack of a retirement tax. All 32 states with progressive taxation also tax some form of retirement income.
A 2019 poll found 73% of Illinoisans were against taxing retirement. Since 2013, those 65 and older have been the least likely to move out. Adding a retirement tax could change that, as it did in Connecticut.
While Illinois politicians may try to walk back their support for a retirement tax to help the progressive income tax pass, their past work and statements to the media show something else. If voters approve the progressive income tax amendment, they will be telling Springfield they also accept a retirement tax.