Illinois retirees' would lose their tax break, if lawmakers sign onto the recommendation of a nonpartisan government research group. But the plan has fallen flat before.
A report from the Civic Federation says Illinois is losing about $2 billion by not taxing retirement income, like the federal government does.
The Federation's President, Lawrence Msall, says that's money Illinois needs, as its fiscal crisis continues to loom. He says that shifts costs onto people who are still working.
"By saying that no matter how much retirement income you have, if you have hundreds of thousands of dollars - in some cases millions of dollars - in retirement income, or income generated from retirement programs, that it's not taxable by the state of Illinois, forces its other workers - including its lower-paid workers - at a much higher rate than it would otherwise."
Msall says Illinois could implement a graduated tax, that exempts individuals with the smallest pensions and other retirement benefits.
However, seniors are traditionally a voting bloc that comes out in droves. Which means politicians may shy away from anything that reaches into seniors' wallets.
A few years back, the AARP protested a suggestion that Illinois begin taxing retirement funds and 401(k)s; the organization has not yet taken a stance on the Civic Federation's proposal.
