Chicago City Wire

The proposed Fair Tax will make it easier for the Illinois Legislature to tax retirement income, according to an analyst with the Illinois Policy Institute. 

“Under the current [state] constitution, you would have to tax all retirement income at the same rate that everybody else has taxed,” Austin Berg, vice president of marketing with the Illinois Policy Institute, said. “That's an enormous political hurdle, but with this you can start with a penny tax on retirement income over $50,000, or establish a whole new set of brackets for retirement income.”

Berg shared his thoughts this week as part of a webinar hosted by Truth in Accounting, along with Ralph Martire, executive director of the Center for Tax and Budget Accountability. Martire favors the Fair Tax.

"This type of increase in this environment makes sense when you look at marginal propensity to consume and what has actually happened in America in response to the great recession, specifically, and over the last 30 years," Martire said.

However, Berg said the word 'fair' is nowhere to be found on the ballot.

"That's because this ballot measure has nothing to do with fairness,” he said. “Illinoisans are voting to give power to Springfield to pass new taxes and at higher rates on all Illinois, not just the wealthy.”

Both chambers of the Illinois General Assembly passed the Joint Resolution Constitutional Amendment No. 1 last year, allowing the proposal to be placed on the Nov. 3 ballot.

“Separation makes you vulnerable and progressive tax regimes allow for that separation,” Berg said. “Claims that this tax is in any way helpful to the working poor in Illinois is insulting. This plan gives Illinoisans in the bottom 20% of the income distribution, an income tax cut of a whopping $6. Perhaps they could buy a fast food meal with it but it's not any real relief. They would be stuck paying the highest tax burden in the Midwest for low-income workers and the third highest tax burden in the nation for low-income workers.”

As previously reported, Illinois Gov. J.B. Pritzker, a Democrat, has said the Fair Tax, also known as a graduated or progressive tax rate, is meant to ease the burden on working class people. He argues it would earn the state $3.4 billion in added revenue.

Regarding whether additional tax revenue generated from the Fair Tax would be used to pay down the state’s $226 billion in debt, Berg said no such funding has been earmarked as such.

“I don't think I've ever heard Illinois’s track record described as one of paying down its debts,” Berg said. “None of this new money is earmarked for any debt. Gov. Pritzker promises around a hundred to $200 million going into the pension system, which can’t even be described as a drop in the bucket. It does absolutely nothing to address Illinois’ debt crisis and that's why we're worried that this will lead to middle class tax hikes because that debt is going to continue growing rapidly and Gov. Pritzker shows no willingness to tackle that.”