Illinois Looks to Raid Private Retirement Accounts to Solve Its Pension Crisis
23rd February 2019
Two state policy groups, the Civic Committee of the Commercial Club of Chicago and the Civic Federation, have come out in favor of ending an exclusion in the state’s income tax for pension income and federally taxable Social Security income. Doing so, the organizations argue, would raise $2.5 billion in revenue, equivalent to a 0.5 percent income tax rate hike and a 0.85 percent corporate tax rate increase.
The problem, of course, is that Illinois does not have a revenue problem. Spending on pensions grew 663 percent between 2000 and 2018, and is projected to continue to grow. This isn’t surprising, given that 60 percent of state pensioners retire in their 50s and pensioners’ direct employee contributions equal only about 6 percent of the benefits they receive. The state is like a teenager with its first credit card, except it never grows up and stops thinking of its credit limit as its bank account.