Civic Federation Advocates Taxing Retirement Income, Raising Income Tax

Feb 12, 2015

Credit WNIJ

Next week, Gov. Bruce Rauner will unveil his spending proposal. The non-partisan Civic Federation has some suggestions.

The Civic Federation’s Director, Laurence Msall, says Illinois’ budget isn’t just in bad shape; its condition is terrible ... and climbing out of it won’t be easy.

“These are not politically attractive answers. There are financial, reality-based suggestions on how the state can stabilize its finances,” he says.

Msall suggests Illinois increase the income tax rate, from 3.75 percent to 4.25 percent, though just temporarily. The report also recommends that for a couple of years, Illinois eliminate the sales tax exemption on food and non-prescription drugs.

The non-profit group’s plan includes long-term tax hikes too: like putting a sales tax on about 30 different services, from legal aid to interior decorating (which Gov. Rauner backs).  The Civic Federation also says Illinois needs to begin taxing non-Social Security retirement income above $50,000.

The plan likewise calls for austerity, and holding state spending. But it's clear that cuts alone should not be the only response to the state's deficit. According to the report, in order balance the budget through reductions alone, Illinois would need to slim spending by 25 percent (amounting to $4.1 billion in cuts to a budget that's currently approximately $35 billion) -- something that would "come at the cost of eliminating entire areas of State services or completely restructuring how Illinois government functions."