The political potency of a potential tax on retirement income to motivate elderly voters in the debate over a graduated-rate state income tax was on full display Thursday as a leading senior advocacy group warned that could be next if the amendment is not approved.
Only a day after AARP Illinois joined with other senior advocacy groups in decrying amendment opponents for contending the proposal could lead to a tax on retirement income if it is ratified, the group sent out a mailer saying “state lawmakers may be forced to consider adding a tax to retirement income”or cuts that will especially hurt seniors if it is voted down.
“Voting yes on the graduated income tax could help the state raise around $3 billion a year to deal with the budget crisis and ensure funding of essential services,” the AARP mailer said. “It also protects older taxpayers by ensuring they aren’t taxed on Social Security and other retirement income, such as pensions, 401(k)s or IRAs.”
The move finds AARP Illinois in the unusual position of joining the opposing Coalition to Stop the Tax Hike Amendment in using the threat of taxes on retirement income as a powerful persuader as each side vies for help from elderly voters, traditionally one of the most dedicated voting demographics in Illinois.
And it comes as the pro-amendment Vote Yes for Fairness group debuted a new TV ad accusing anti-amendment forces of “trying to scare” seniors with the retirement tax issue.
The debate surrounds a proposed change to the state constitution that tops the Nov. 3 ballot, asking voters whether to eliminate the state’s currently mandated flat-rate income tax with a graduated tax that levies higher rates as income rises.
The amendment does not directly affect retirement income in any way, either by protecting retirements from taxation in the future or by preventing such a tax from being imposed. Lawmakers already have the power to make that change. Illinois is one of three states that levies an income tax but does not impose it on retirement income, such as pensions and IRA and 401(k) plans.
But amendment opponents in a flurry of TV ads have contended a graduated tax would open the door to lawmakers imposing a tax on retirement benefits because the amendment would allow it to be levied on higher retirement incomes.
“Every state with a graduated income tax also taxes retirement income, which is further proof we simply cannot trust Springfield politicians with the new power this tax hike amendment gives them,” Lissa Druss, spokeswoman for anti-amendment coalition said in a statement. “They are desperately trying to backtrack what they’ve already said they support—which is taxing retirement income if their tax hike amendment is approved.”
Opponents point to remarks in June by Democratic state Treasurer Michael Frerichs who said one point in favor of adopting the graduated-rate amendment was that it could allow the taxing of retirement income for those who could afford it and was “worth discussion.”
Frerichs has since said he opposes taxing retirement income, noting the proposal’s chief proponent, Democratic Gov. J.B. Pritzker does as well.
Opponents now are pointing to a WTTW-Ch. 11 interview in February 2018 — months before Pritzker defeated Republican Gov. Bruce Rauner — in which then state Reps. David Harris, R-Arlington Heights, and Christian Mitchell, D-Chicago, spoke in support of considering a tax on wealthier retirement incomes.
Harris, who proposed a plan taxing retirement income of $100,000 or more in 2018, is now Pritzker’s director of the state Department of Revenue. Mitchell is a deputy governor in Pritzker’s administration.
Proponents of the amendment are now contending it is anti-amendment forces who are backing a tax on retirement income. They note one group that is opposing the amendment, the Civic Committee of the Commercial Club of Chicago, proposed imposing such a tax in February 2019.
In a new TV spot from Vote Yes for Fairness, a senior identified as Amy Boatman pitches support for the amendment.
“The billionaires are spending a fortune trying to scare us. They want to keep getting away without paying their fair share. I did my research and here are the facts: The Fair Tax will not tax retirement income,” Boatman says in the ad. “As a matter of fact, 97% of Illinoisans will get a tax cut, including seniors like me. It’s time for change. Vote yes for fairness.”
Proponents have said that those making $250,000 a year or less, about 97% of Illinoisans, would pay at least the same or less income tax than they do now under a rate schedule that would take effect Jan. 1 if the amendment is adopted. But opponents contend adoption of the amendment would hurt businesses, cost jobs and allow lawmakers to cherry pick income groups for future tax hikes.
The debate over taxing retirement income comes as the Illinois Chamber of Commerce announced 40 business organizations, including the state’s automobile dealers' association and 27 local chambers of commerce, joined a coalition against the amendment that it is leading along with such groups as the Illinois Farm Bureau and the National Federation of Independent Business—Illinois.
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