Consider taxing high-income pensions

 
Posted4/3/2019 1:00 AM

When determining taxable income, retirement income received by higher income taxpayers is subject to being taxed at the federal level. When preparing the Illinois income tax return, any pension or retirement income that is taxed at the federal level (higher income taxpayers) is excluded at the state level for calculation of Illinois income tax liability.

Considering that one of the biggest reasons that Illinois is struggling with finances is higher-than-national-average pension costs (including those that double-dip) then why not eliminate this exclusion? For lower income tax payers, most of what is received from Social Security and pensions is not taxed at the federal level and therefore would continue to be excluded from taxation at the state level.

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If this loophole continues, then even with a graduated tax schedule, those benefiting from significant retirement income will continue to get a free ride.

How much would tax revenues increase? I don't know, but I suspect that it is significant and should be considered before adding higher taxes to wage earners.

Angelo Cusinato

Cary

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