Implementing the “millionaire” tax would give lawmakers the power to tax retirement income. Every state with a progressive tax also taxes retirement income. | AP Photo
By Patrick Andriesen | Illinois Policy Institute
A non-binding referendum on the Nov. 5 ballot asking whether the state should adopt a “millionaire” tax to support property tax relief could open the door for lawmakers to begin taxing Illinoisans’ retirement income.
To institute a millionaire tax, Illinois lawmakers and voters would have to scrap the state’s flat income tax guarantee in the Illinois Constitution and approve a progressive tax structure, allowing income to be taxed at varying rates. Once this is allowed, Illinois lawmakers could expand it to several kinds of income taxes, including retirement income.
Illinois Treasurer Mike Frerichs said as much when discussing Gov. J.B. Pritzker’s 2020 “fair tax” referendum, which would have replaced Illinois’ current flat tax with a progressive tax.
“One thing a progressive tax would do is make clear you can have graduated rates when you are taxing retirement income,” Frerichs said while speaking at an event hosted by the Des Plaines Chamber of Commerce. “And, I think that’s something that’s worth discussion.”
The Illinois Policy Institute found all 32 states with a progressive tax also have retirement taxes.
Proponents of the “millionaire” tax claim the progressive policy will provide real property tax relief for Illinoisans, despite estimates showing the savings will fall at least $2 billion short of covering the state’s current costs.
In reality, the referendum is a ploy state lawmakers are using to justify the elimination of the state’s flat income tax and grant themselves the power to set new and higher taxes, including on retirees, whenever they decide they don’t have enough money.
Taxing retirement income is not a new idea in Illinois. Former Chicago Mayor Rahm Emanuel proposed taxing retirees with incomes over $100,000 in 2019, while the Civic Committee of the Commercial Club of Chicago proposed taxing retirement income over $15,000 per year.
Read more here.
Related: “’Millionaire Tax’ proposal would hike income tax rates by 62% for nearly 24,000 small businesses,” “Editorial: Illinoisans, vote ‘no’ on the millionaire’s tax ballot question,” “‘Millionaire’ Tax would be $2-$3.3 billion short of providing any property tax relief,” “Legislator says ‘millionaire tax’ will make Illinois a ‘business desert’ (McLaughlin),” “Should Illinois millionaires fund property tax relief?”
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