Pritzker: Illinois needs progressive income tax to help the budget

Gov. J.B. Pritzker said Monday he doesn't foresee pushing pension obligations onto local municipalities and school districts, but Illinois needs a progressive income tax to address the state's budget woes.

In an interview with the Daily Herald editorial board, he said Illinoisans should get details of how much they might pay under the proposed new tax system soon.

The new governor is putting a lot of political capital into trying to switch Illinois from a flat tax to a progressive system that charges different rates to people based on their earnings. In a wide-ranging discussion Monday, he talked with editors about his proposed 2019-2020 budget and why he believes seeking voter approval for a graduated income tax in November 2020 is an important part of addressing the state's economic problems.

Asked if he viewed pension debt "as a state responsibility and not something the state is just suddenly going to dump on a school district or municipality," Pritzker replied, "That's right."

"We're all one state," he said. "I'm the governor of the state, so I'm worried about local property taxes just as I am about state income taxes. I want to make sure we're not overburdening people."

How to pay for out-of-control pension obligations to employees is a recurring theme expressed by candidates in the April 2 municipal and school board elections.

In his budget address Feb. 20, Pritzker said a progressive tax is part of the long-term solution to pension debt, and he pledged to dedicate a portion of it - hundreds of millions of dollars, he said - toward pensions.

"You cannot talk about a budget in the state of Illinois without trying to deal with pensions, and one thing we're trying to do is put more assets in the system," he said Monday.

The state faces about $134 billion in unfunded pension liabilities.

Despite Democrats controlling the governor's mansion, state Senate and House, passing a referendum on a new tax system is expected to be a heavy lift. Pritzker called the current flat tax "regressive" and stressed that the wealthy should pay more.

The proposed income tax brackets should be released "probably a couple weeks from now," Pritzker said.

"It's going to be very important for us all to know what the rates are going to be (and) for people to really understand what does it mean for them," he said.

"(Next), we have to negotiate this with the legislature, including the Republicans. Every Republican I think has said they're opposed to a graduated income tax interestingly without knowing how it would affect the people in their district."

GOP state Rep. David McSweeney of Barrington Hills thinks Pritzker is betting on an unknown to solve the state's fiscal issues, given that 60 percent of voters would be required to approve the tax shift in the November 2020 general election.

"This is a massive tax increase," McSweeney said Monday, adding he fears it will drive Illinoisans to other states.

"The whole (2019) budget is based on future tax revenues, and my view is Illinois is overtaxed. It's a way to raise more money to add more programs when we need to cut spending," McSweeney said.

Pritzker stressed that "it's what most states have and what we should have, too."

Pritzker brushed aside the alternative of taxing retirement income and said holding a referendum on giving the state more flexibility in reducing its pension debt would be tied up in court for years.

One solution Pritzker is pursuing with advice from local mayors and from fire and police administrators is consolidating separate pension funds.

Illinois has about 670 separate public pension funds that hold $170 billion in assets with liabilities in excess of $355 billion, officials said.

Deputy Gov. Dan Hynes, who also attended the editorial board meeting, said smaller pension funds invest from a position of isolation and can't negotiate lower fees or invest in diverse portfolios, which creates inefficiencies.

"Hopefully we'll move toward a more sensible system of centralizing investment functions," Hynes said.

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IN THE VIDEO ABOVE: Pritzker talks about budget, new tax

Find specific topics addressed by Gov. J.B. Pritzker in Monday's meeting with the Daily Herald editorial board.

The budget: 0:00-5:35

Graduated income tax: 5:35-15:05

Why people are leaving the state: 15:05-17:35

Tax on insurance companies: 18:05-19:36

Legalizing marijuana: 19:39-28:40

Sports betting: 28:40-30:36

Increasing minimum wage: 30:36-35:21

Pension issue: 35:21-43:34

Infrastructure: 43:34-45:18

Tollways: 45:19-47:38

What was unexpected after becoming governor? 47:38-end

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