A progressive income tax in Illinois. What their financial advisor doesn’t know.

Fred,

I sent your article to my financial advisor who works in Illinois. Love to have your comment back.

Hi,

Thanks for your comment and we appreciate your contacting us to send your article. What they are saying is correct but they stop right there and bring up nothing else. Making everyone think that makes sense.

You can go back and listen to what I said. This amendment is all about Trust. Legislators in Illinois over the years have never done what is in the best interest of anyone but themselves.

They can raise tax rates right now and don’t need to ask anyone. They don’t because they know they will get thrown out of office.

Remember what I said. By passing the Illinois Constitutional amendment the state would be able to tax anyone anything they want.

They could even start taxing residents on their IRA distributions as they pleased.

We are already the second highest tax rate In the country on property taxes. If passed we would be the second highest business tax in the country. And Cook County later this year will be the highest sales tax in the country.We are also #1 in something else also.

The #1 state in people Moving Out of a state.

As for your pension there is no faster way for you to loose it than if this passes in my opinion. The more people that leave the state the less there are left to pay for your pensionRemember, it is not about what black (sic) or brown (sic) or white or green people (sic) pay in taxes. It is about spending LESS not taxing more.

Funny your article says nothing about how much blacks (sic), browns (sic), whites, or green people (sic) are paying proportionaly (sic) for property and sales taxes. That is MUCH more of a problem than the state income tax.

The new tax will bring in about 3.8 Billion in new taxes. The state in various estimates will be short about $10-$13 Billion short next year and every year thereafter.

It is estimated that the tax rate on EVERYBODY in the state would have to be around 9% on EVERYBODY to just break even on what they spend. That gives you some idea how bad off the state of Illinois really is.

If this Amendment was tied to dollar for dollar reductions in property taxes for the poor I would be all for it.

If it was being done to lower sales taxes on the poor in the state dollar for dollar I would be for it.

If was to reduce corporate taxes dollar for dollar for those companies that hired the poor I would be all for it.

This will do none of that.So back to trust. The state needs to spend Less (sic) not tax more. Passing this amendment just will ultimately make things even worse for people living in the state.

There just aren’t enough rich people in the state if they taxed them at 15% to pay the bills.

Look at California. There (sic) top rate is going to 16.8% and they are just in as much trouble as Illinois. Didn’t work there and won’t work here.

Also this is the first year now where more people are moving out of California than moving in. And as you can imagine they are the wealthy moving out not the poor.

There is a good chance in the future that states like California and Illinois May (sic) have to file for some type of bankruptcy if they don’t change their ways.

Hope this helps and go out and vote this year no matter who it is for.

Have a good weekend.

-Financial Advisor

……………………………..

Dear reader,

My suggestion is to change financial advisors.

They think there are green people. That raises serious issues for me right off the bat.

They are wrong about population exodus. Recent studies (you can do the googling) show no relationship between people leaving the state and tax rates. There are tons of other factors which apply to Illinois and other states which cause people to move other than tax rates.

Plenty of states that gained population in the last 10 years have more onerous tax burdens than Illinois, including Hawaii and Minnesota. It’s true that of the four states that lost population in the last decade, three are among the top 10 most-taxed: Illinois, Vermont, and Connecticut. But the state that lost the largest percentage of its residents is West Virginia, which ranks only 15th. Meanwhile, the state with the lowest tax burden, Alaska, is the 48th most populous. It lost more of its residents in the past year than any state besides West Virginia.

IRA distributions that are part of retirement income are not taxed in Illinois.

Your financial advisor doesn’t know that?

Dump them.

No retirement income is taxed in Illinois. They don’t know that?

The legislature already can tax at rates they want. The amendment doesn’t set the rates. It simply ends the practice of a flat tax.

A flat tax is a bigger hurt on working people than the rich. A 4.9% rate on someone earning 50K is a bigger hurt than on someone earning $250K. The current law requires the rate to be flat. A new law would allow a graduated rate.

Property taxes (which retirees do pay) are high because the state can’t raise enough revenue with a flat income tax (which retirees don’t pay). So guess whose taxes are higher now? Retirees. Because they are taxed on property if they have some, and local sales taxes which have to make up the difference for money the state cannot provide.

Your financial advisor doesn’t know that?

The amendment doesn’t solve every problem. Corporations and the rich will still have their tax lawyers finding loopholes.

The amendment change is very targeted and limited. It allows the legislature to enact a graduated income tax so the wealthy can be taxed at a higher rate than a first responder or a teacher.

And Illinois cannot legally file for bankruptcy. The U.S. Constitution forbids it.

Your advisor didn’t know that?

Fred

8 thoughts on “A progressive income tax in Illinois. What their financial advisor doesn’t know.

      1. This was my reply back to him:

        I’ll choose to side with Fred Klonsky on this topic. Please don’t knock teachers’ pensions the next time you speak. As I said, all pensioners paid into the system but the state reneged on what they are supposed to do. I am a member of IRTA [Illinois Retired Teachers Association]. We fought to keep the state from taking away our earned benefits.

        I feel very sorry for teachers who are now teaching…Tier 2 teachers. When they retire it is totally possible that they will have to sue to get a decent retirement. They are projected to earn less than people who get Social Security. [Teachers don’t get full Social Security benefits. My Social Security is around $89 a month because I worked overseas and didn’t contribute during that time. Illinois teachers are ONLY supposed to get enough to cover Medicare.]

        And yes, I DO believe the wealthy should pay ‘their fair share’.

  1. I just sent this to my financial advisor:

    We’re No. 28! and Dropping
    Sept. 9, 2020
    By Nicholas Kristof
    Opinion Columnist

    A measure of social progress finds that the quality of life has dropped in America over the last decade, even as it has risen almost everywhere else.

    The newest Social Progress Index, shared with me before its official release Thursday morning, finds that out of 163 countries assessed worldwide, the United States, Brazil and Hungary are the only ones in which people are worse off than when the index began in 2011. And the declines in Brazil and Hungary were smaller than America’s.
    “The data paint an alarming picture of the state of our nation, and we hope it will be a call to action,” Michael Porter, a Harvard Business School professor and the chair of the advisory panel for the Social Progress Index, told me. “It’s like we’re a developing country.”
    The index, inspired by research of Nobel-winning economists, collects 50 metrics of well-being — nutrition, safety, freedom, the environment, health, education and more — to measure quality of life. Norway comes out on top in the 2020 edition, followed by Denmark, Finland and New Zealand. South Sudan is at the bottom, with Chad, Central African Republic and Eritrea just behind…

    ……………………….

    Sep 7, 2017 ·
    Illinois is a low-outmigration state, and other things you probably didn’t know about people moving in and out of the Land of Lincoln

    Okay, more Americans are moving out of Illinois than into it — is that a new problem?

    Nope. A recent report from KDM Consulting found that Illinois has had net negative domestic migration for close to a century: with the exception of a one-year blip in 1947, the last time more Americans moved into the state than out of it was 1920…
    How much does taxes have to do with it?

    It’s common to hear that people leaving Illinois — or avoiding it by not moving here — do so because of high taxes. But generally, researchers find that taxes are relatively low priority factors when people decide to move, falling far below things like being close to family, job markets, and housing costs, which often make a bigger difference in total cost of living than state and local taxes.
    In Illinois, some commentators have pointed to a Southern Illinois University poll from October 2016 that found respondents who wished to leave the state cited taxes more than any other single issue. But even in that poll, 73 percent of respondents named an issue other than taxes as the reason for leaving.
    On top of that, as you’ve seen, the evidence shows that Illinois’ migration problem isn’t so much about people in the state leaving, as people out of the state choosing not to move here…

    https://budgetblog.ctbaonline.org/illinois-is-a-low-outmigration-state-and-other-things-you-probably-didnt-know-about-people-moving-ce3f0cd6ab4c

    …………………………………………………
    Pew Research Center
    JANUARY 9, 2020

    Upper-income households have seen more rapid growth in income in recent decades

    The growth in income in recent decades has tilted to upper-income households. At the same time, the U.S. middle class, which once comprised the clear majority of Americans, is shrinking. Thus, a greater share of the nation’s aggregate income is now going to upper-income households and the share going to middle- and lower-income households is falling.9

    The share of American adults who live in middle-income households has decreased from 61% in 1971 to 51% in 2019. This downsizing has proceeded slowly but surely since 1971, with each decade thereafter typically ending with a smaller share of adults living in middle-income households than at the beginning of the decade.

    …………………
    The Top 1% of Americans Have Taken $50 Trillion From the Bottom 90%—And That’s Made the U.S. Less Secure
    SEPTEMBER 14, 2020

    Like many of the virus’s hardest hit victims, the United States went into the COVID-19 pandemic wracked by preexisting conditions. A fraying public health infrastructure, inadequate medical supplies, an employer-based health insurance system perversely unsuited to the moment—these and other afflictions are surely contributing to the death toll. But in addressing the causes and consequences of this pandemic—and its cruelly uneven impact—the elephant in the room is extreme income inequality.

    How big is this elephant? A staggering $50 trillion. That is how much the upward redistribution of income has cost American workers over the past several decades.

    This is not some back-of-the-napkin approximation. According to a groundbreaking new working paper by Carter C. Price and Kathryn Edwards of the RAND Corporation, had the more equitable income distributions of the three decades following World War II (1945 through 1974) merely held steady, the aggregate annual income of Americans earning below the 90th percentile would have been $2.5 trillion higher in the year 2018 alone. That is an amount equal to nearly 12 percent of GDP—enough to more than double median income—enough to pay every single working American in the bottom nine deciles an additional $1,144 a month. Every month. Every single year…

    https://time.com/5888024/50-trillion-income-inequality-america/?utm_source=email&utm_medium=email&utm_campaign=email-share-article&utm-term=ideas_covid-19

  2. I just sent this to my financial advisor. I don’t think he realizes how hard it is to survive on a teacher’s salary. I get upset when the wealthy continue to get more and more and never have to ‘pay their fair share’.
    ………………………………..
    I just got one other important thought to give to you.

    I got divorced in 1982 and left the country to work in Bolivia in 1996. So, for ALL of those years that I worked in Illinois as an elementary school teacher, I was able to SAVE $50 ONE YEAR. That was the year that I joined the credit union in Bensenville, IL. I tried to save but never made enough to add to this amount.

    One year, when I was working in Chicago Heights, it was payday. I was running out of gas and the only money I had left was $.75. I put that amount in the gas tank and made it to school. Each pay period I’d put some money in the credit union but would have to take it out before the end of every two week pay period.

    When I lived in Park Forest, IL I picked up some individually wrapped chocolates to give out for Halloween. Two bags hadn’t been opened and I had to return them to the grocery store because I couldn’t afford such luxury. I kept my apartment at a cold temperature in the winter because I couldn’t afford to spend more on heating.

    When I’d take my daughter to McDonalds, which wasn’t very often, I’d buy her lunch but couldn’t afford one for myself.

    Now, you say that teachers’ pensions are too high and the state can’t afford to continue these payments? NO!

    The money I invested with you came from a divorce settlement. That money came from my mother-in-law who took out a second loan on the house my husband possessed. I was getting $200 a month in child support money and I still thought about money 95% of the time. Teachers’ pay was rotten. I had a masters degree and 15 grad hours and this is how I had to live.

    I lived like this because I figured the money from the divorce decree would be the only money I’d have when I retired. I tried to live on what I was earning. I had no idea that I would be working at the International School of Kuala Lumpur and for the first time make a decent amount of money.

    Ugh. Grr.

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