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Sunday, January 12, 2025

Pritzker's 'fair tax' proposal could leave Illinois retirees out in the cold, critics say

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Illinois Gov. J.B. Pritzker | File photo

Illinois Gov. J.B. Pritzker | File photo

Illinois does not currently tax retirement income because it is exempt from the state income levy, but opponents of Gov. J.B. Pritzker's so-called "fair tax" agenda say that could soon change if voters approve a constitutional amendment to ratify the current flat-tax system on Nov. 3.

Also known as the graduated income tax or progressive tax, Pritzker's fair tax will replace the state’s current flat income tax, making it easier to tax retirement income by allowing one set of rates for ordinary income and a separate rate for retirement income, according to the Daily Herald.

“If the legislature were to have the ability to implement a graduated income tax, it becomes easier to tax retirement income because they can apply different rates to different types of income,” said Andrew Nelms, a senior adviser with Americans for Prosperity Action-Illinois, a 527 tax-exempt political organization. “It certainly seems like taxing retirement income is likely given the reality of how the legislature has treated taxpayers in the past and the legislature's chronic fiscal irresponsibility and lack of fiscal discipline.”


AFP Action-Illinois Senior Adviser Andrew Nelms | File photo

Just this week, it was widely reported that Sen. Terry Link (D-Waukegan) was indicted by the federal government for allegedly falsifying 2016 tax documents. Link was also the assistant majority leader of the Illinois Senate and a member of the Legislative Ethics Commission before resigning.

“We're working day in and day out to educate voters on the issue by hosting events, reaching out to voters and really waging a full-fledged grassroots campaign against the fair tax,” Nelms told the Chicago City Wire. “We’d love for people to visit us on our social media and website.”

Voters can follow No Unfair Tax on Facebook and Twitter.

As previously reported in the DuPage Policy Journal, voters will decide by referendum whether Illinois should adopt a graduated income tax after both chambers of the state legislature passed the Joint Resolution Constitutional Amendment No. 1 last year.

“The flat tax makes raising taxes more difficult because you have to raise taxes on everyone, so if the state legislature were to tax retirement income now under the flat tax, it would be at the same rate of 4.95% that is paid by everyone else on their individual income,” said Nelms. “If it were raised under the unfair tax, it could be at whatever rate the lawmakers decide.”

Pritzker introduced the graduated tax rate proposal as a way to ease the burden on middle-class families by raising $3.4 billion in added state revenue, but critics contend the new revenue would not be used to stop rising pension gaps or property taxes.

“The governor has not suggested that any of this additional revenue would go toward property tax relief," Nelms said. "In fact, in this current fiscal year, if the amendment is ratified by voters in November and becomes effective the first of the year in 2021, the governor has suggested that the state will raise its pension payment by a whopping 1%. He has not committed this new revenue to address our pension crisis. He has not committed this new revenue to address our property tax crisis, but rather it's all going to fuel new spending.” 

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