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Monday, March 7, 2011

PENSION: (Illinois) Illinois Senate president wants to look at taxing retirement income

--Just have to keep trying to screw with us. People barely making it on a 50% disability and now they want to take more.--

STORY AT Chicago Tribune

March 07, 2011

Posted by Monique Garcia and Rick Pearson at 3:40 p.m.; updated at 4:37 p.m.

Illinois Senate President John Cullerton today suggested the state should start taxing the retirement income of senior citizens who are able to afford it.
The state does not currently tax pensions or retirement funds such as 401(k) plans, but Cullerton told a City Club of Chicago luncheon that should take place as part of an overall look at what he said was Illinois' "outdated" tax system.

"It would just be a matter of fairness," said Cullerton, a Chicago Democrat.

Details are still being worked out, but Cullerton said the state could bring in could bring in upward of $1.6 billion a year. Cullerton said the money could be used to provide tax relief elsewhere, whether that be lowering the corporate income tax rate, reworking sales tax rates or some other idea. Cullerton also suggested a means-test to avoid taxing low-income seniors.

Democratic Gov. Pat Quinn today said he hadn’t seen details of Cullerton’s proposal, but indicated that it should be looked at as part of an effort to achieve tax “fairness.”

“I think it’s important that we always be open to reviewing the tax code,” Quinn said, restating his call for a commission to review the state’s tax laws with attention to fairness to “everyday taxpayers” and economic growth. “I think everything should be looked at. You know, how we go about it is obviously something we have to work together on.”

Imposing a tax on retirement incomes in Illinois could be a politically difficult prospect. Seniors make up a potent voting demographic in the state. Even the process to end free mass-transit rides for the elderly, a cost many seniors said they could afford, proved tough politically to get through the General Assembly.

Cullerton's idea comes after lawmakers and Quinn raised the state income tax rate from 3 percent to 5 percent in January.