Taxing retirement income would prompt retirees to flee Illinois, Syverson says
A Chicago think tank that says Illinois is missing out on billions of dollars in revenue by leaving retirement income untaxed hasn't thought that idea through, Sen. Dave Syverson (R-Rockford) said during a recent interview.
"I don’t know what these authors were thinking, but they clearly were not reporting the net effect of what would happen if they started to tax retirement benefits, especially on higher incomes," Sen. Dave Syverson told the Rockford Sun.
Syverson, deputy Republican leader who has been in the Illinois Senate since 1993, has represented the 35th Senate District since 2013, having previously represented the 34th District. He is unopposed in the November election, and he was unopposed during the primary election last month.
Illinois' 35th Senate District is within Winnebago, Boone, Dekalb and Kane counties.
The idea of taxing retirement income is a no-go idea that Springfield lawmakers who return to the legislature Tuesday, should not consider, Syverson said.
"No, they should not tax retirement income," he said of lawmakers who are trying to finalize a state budget before the spring session's scheduled last day on May 31. "It is the one area that is helping keep wealthier seniors in Illinois. The last thing we need is middle-class and upper-income seniors leaving Illinois and taking all of their disposable dollars with them. The net fact would be devastating on our economy."
In a report issued last month, the Civic Federation also said an outmigration of seniors might be the result if Illinois started taxing retirement income. The report estimated that at the current state income tax rate of 4.95 percent, Illinois could bring in an additional $2.7 billion "or about 7 percent of projected FY2019 general operating revenues" by taxing retirement income.
The report also said that retirees could thwart the state's ability to raise that amount if the state is taxing their retirement income at the same rate that wages are taxed.
"Actual revenue could be lower if the tax causes changes in behavior, such as an increased use of tax deductions or retirees leaving Illinois for a state with more favorable tax treatment," the report said. "Research has not shown a strong link between seniors' interstate migration and state income tax policies."
Illinois' out-migration problem is well documented and is serious enough that Illinois' dropped from fifth most-populous in the nation to sixth last year.
Taxing retirement income wouldn't help the state, Syverson said.
"As mentioned, I don’t think it would help the state economically," he said. "It would lead to more out-migration and the loss of disposable dollars and charitable dollars that our state desperately needs. It would also lead to the loss of significant volunteer hours to charities."
That would mean a loss to Illinois measured in more than dollars, "since many in this population are involved in giving back time and resources to the community which are not considered in this report," Syverson said.