Illinois pension plans are in extremely dire shape even with the huge stock market returns over the past few years. Illinois Spendaholics have proposed a huge array of tax hikes to make up the shortfall.
Ben VanMetre at the Illinois Policy Institute explains in this guest post.
More than $100 billion in tax hikes over five years may sound like a joke. But to many Illinois lawmakers, it sounds like a solution.
State Rep. Lou Lang, D-Skokie, recently said that “creative lawmakers can come up with many options for new revenue.” Unfortunately, Illinois lawmakers have outdone themselves in the creativity department this year.
The array of six tax hikes proposed by Illinois lawmakers this legislative session adds up to more than $100 billion over the next five years. That’s more than the state’s total projected general-fund spending in fiscal years 2016, 2017 and 2018 – combined.
And the tax-hike proposals don’t stop there.
Additional tax-hike proposals are being thrown around without any idea of how much they might raise. State Rep. Rita Mayfield, D-Waukegan, proposed a 3.75% tax on guns and gun parts. When asked how much revenue it would raise, she said she didn’t know but thought “if we can get a good million or so, I’ll take it.”
Enough is enough. How can taxpayers take their legislators seriously when they’ve put more than $100 billion in tax hikes on the table in a state that is on the brink of financial and economic collapse?
Rather than trying to build a “creative” revenue plan based on how much lawmakers want to spend over the next few years, they should instead focus on building a spending plan based on the amount of revenue the state will have under its current tax structure.
Director of Pension Reform
Had Pat Quinn won reelection, most or all of those proposals would have passed. And more people would have fled the state in response.
I have a far better set of ideas.
- Immediately switch from a defined benefit system to a contribution system.
- Allow municipalities to go bankrupt so they can shed pension obligations
- Allow municipalities to create their own pension systems instead of setting everything at the state level.
- Enact a progressive tax on pension benefits.
- Tax at a 90% rate, all benefits above a certain level.
The one tax worth instituting is a progressive tax on pension benefits, big enough to make the state system solvent. Let those who want a “progressive tax” have it. Just put it on something that makes sense.
Should the Illinois Supreme Court strike down a tax on pension benefits, I would take the case to the US Supreme court where I would expect it to win.
For a look at the sorry state of affairs of the Illinois pension system, please see Illinois Pension Plans 39% Funded; Taxpayers On the Hook for $105 Billion in Liabilities; It Will Get Worse!
Mike “Mish” Shedlock