Under funded pension plan tidal wave ...

[Texas Proud]

Quote:

Originally Posted by steelyman Since much of the discussion in this thread has centered on IL-specific issues and retirement income. I want to add one more thing I thought of this week. IL has a flat tax, currently 3%. That IS spelled out in one of the Articles of the Constitution (the language used is "non-graduated rate"). One can think what they like of that but political stomping of feet is best taken outside, not on this forum, I imagine. But my naive thought is that this would apply if taxation of retirement income were considered. Again, everyone is entitled to their personal opinion, of course.

Just curious as I do not know.... is this a flat tax RATE or flat tax?

IOW, are there exemptions and deductions.... like the first $10K or $30K is not taxed... and if you get $X per dependent off etc. etc.....

If so, then it is not really a flat tax.... as someone who makes under that level pays nothing and someone who pays over pays something... but, nobody would actually pay 3%.... some might get close, but never there...


OR, is the 3% paid from the first dollar... which would mean it really is a flat tax.... as everybody pays not matter what.... as an example, a sales tax is a flat tax as everybody pays it if you buy a taxable item (less any cheating).....

[steelyman]

All my files are currently packed away and in storage due to moving, but my recollection is that there are exemptions and so on.

There are plenty of Illini here, though, so they can provide better info than that.

[JoeWras]

$2125 exemption.

Even if retired, this may come into play if you have investment income. In the old days of high interest rates, Dad had to file. Last few years of microscopic interest rates -- he didn't have to file because non-retirement income was below the exemption number.

[Texas Proud]

Quote:

Originally Posted by JoeWras $2125 exemption. Even if retired, this may come into play if you have investment income. In the old days of high interest rates, Dad had to file. Last few years of microscopic interest rates -- he didn't have to file because non-retirement income was below the exemption number.

I would have thought there would be one, but DANG..... that is awfully low...

But then again, they exempt pensions (from earlier posts)....

[Greencheese]

Quote:

Originally Posted by Texas Proud Just curious as I do not know.... is this a flat tax RATE or flat tax? IOW, are there exemptions and deductions.... like the first $10K or $30K is not taxed... and if you get $X per dependent off etc. etc..... If so, then it is not really a flat tax.... as someone who makes under that level pays nothing and someone who pays over pays something... but, nobody would actually pay 3%.... some might get close, but never there... OR, is the 3% paid from the first dollar... which would mean it really is a flat tax.... as everybody pays not matter what.... as an example, a sales tax is a flat tax as everybody pays it if you buy a taxable item (less any cheating).....

It was a flat tax based on 3% then raised to 5% for 3 years and now reset back to 3.75% of your earnings. Essentially its the # from the top of page 2 of your 1040 federal return and then you subtract dependents and a few other small random things that most people don't deal with. Afterwards you just take that number times 3.75% and you're done.

[ripper1]

Speaking of pension tidal waves the city of Chicago Pension Reform was struck down and ruled unconstitutional by a local judge and now will assuredly go to the Illinois Supreme Court where I believe it will also be shot down. Too many pension holidays by legislators there has come home to roost. Time to pay the piper. Let's start at the top with wealthy elite and corporations.

[Siestatime]

Quote:

Originally Posted by ripper1 Speaking of pension tidal waves the city of Chicago Pension Reform was struck down and ruled unconstitutional by a local judge and now will assuredly go to the Illinois Supreme Court where I believe it will also be shot down. Too many pension holidays by legislators there has come home to roost. Time to pay the piper. Let's start at the top with wealthy elite and corporations.

1+. Seriously.


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[Sunset]

Quote:

Originally Posted by youbet While planning retirement finances, I knew that Illinois wasn't going to tax my retirement income. But now, nine years into retirement, I'm finally realizing what an attractive situation this is for retirees. DW's pension = no state tax. My future MegaCorp pension = no state tax. My SS = no state tax. TIRA withdrawals = no state tax. Upcoming RMD's = no state tax. Roth conversions = no state tax. Etc. I'm certainly not looking forward to anything that would change this situation, but sometimes it does seem too good to be true.

But FL and a bunch of other States have that plus zero tax on dividends, capital gains, earnings, or put another way: zero State tax....

[rayinpenn]

Before you plan your retirement in tax free Illinois I suggest you consider:

The most poorly funded state in America, Illinois only funds 43.4 percent of its pensions. It has an unfunded liability of $82.9 billion, with 20.7 percent going unfunded for each person. I suggest that money has to come from somewhere and it isn't rocket science.

1. Reduced and differed benefits
2. Higher taxes
3. Reduced services & layoffs


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[ripper1]

Quote:

Originally Posted by rayinpenn Before you plan your retirement in tax free Illinois I suggest you consider: The most poorly funded state in America, Illinois only funds 43.4 percent of its pensions. It has an unfunded liability of $82.9 billion, with 20.7 percent going unfunded for each person. I suggest that money has to come from somewhere and it isn't rocket science. 1. Reduced and differed benefits 2. Higher taxes 3. Reduced services & layoffs Sent from my iPad using Early Retirement Forum.

As to your point 1: The court has spoken in plain language that legislators do not understand that benefits cannot be reduced. 2: Yes, higher taxes and let's start at the top with wealthy elite and corporate welfare. 3: I guess that is inevitable.

[steelyman]

I don't know if it got much airplay outside of IL, but one of the attorneys arguing on behalf of state employees who had filed suit to protect their benefits had an interesting point to make to the Supreme Court justices regarding the State's defense in the Pension Reform case.

He said the State was trying to use the Lizzie Borden defense: "I know I killed my parents, but have mercy on me. I'm an orphan."

[Texas Proud]

Quote:

Originally Posted by ripper1 As to your point 1: The court has spoken in plain language that legislators do not understand that benefits cannot be reduced. 2: Yes, higher taxes and let's start at the top with wealthy elite and corporate welfare. 3: I guess that is inevitable.

The only problem with your #2 answer is that both of these can move much easier than the middle class...


So, unless there are benefits that exceed taxes paid, I would bet that would happen.... (note: benefits do not always mean money).

[ripper1]

Illinois also cut its income tax rate by 25% in January. So they don't have a leg to stand on with its police powers argument.

[Mulligan]

Quote:

Originally Posted by rayinpenn Before you plan your retirement in tax free Illinois I suggest you consider: The most poorly funded state in America, Illinois only funds 43.4 percent of its pensions. It has an unfunded liability of $82.9 billion, with 20.7 percent going unfunded for each person. I suggest that money has to come from somewhere and it isn't rocket science. 1. Reduced and differed benefits 2. Higher taxes 3. Reduced services & layoffs Sent from my iPad using Early Retirement Forum.

My friend moved across the dirty old Mississippi to Illinois recently when he got married and was bragging about the 3k in state taxes he saved on his pension. Until he got his property tax statement and found it to be about $3k higher than his previous home in MO. The savings evaporated pretty quick....


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[rayinpenn]

In my humble opinion Illinois will find a way to reduce benefits in the years to come. It is inevitable as the spring, summer fall and winter. They are in too deep but there is one hope...

Freeze benefits and pray for inflation.


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[youbet]

Quote:

Originally Posted by Sunset But FL and a bunch of other States have that plus zero tax on dividends, capital gains, earnings, or put another way: zero State tax....

Having no state income tax and collecting revenue in other ways is very different from having a state income tax but exempting retirement income leaving the burden to young workers.

[youbet]

Quote:

Originally Posted by steelyman I don't know if it got much airplay outside of IL, but one of the attorneys arguing on behalf of state employees who had filed suit to protect their benefits had an interesting point to make to the Supreme Court justices regarding the State's defense in the Pension Reform case. He said the State was trying to use the Lizzie Borden defense: "I know I killed my parents, but have mercy on me. I'm an orphan."

\

Yes, that was a clever way to describe the situation.

It's all about under-funding.

[steelyman]

Well, in IL the latest news (just today) is interesting to say the least. I'd say what but it would fall too close to the wise forum political guidelines. Interested people can fact-check around.

A fact-check I forgot to mention is the name of the attorney who made the "Lizzie Borden" observation. It was Aaron Maduff.

[youbet]

Quote:

Originally Posted by rayinpenn In my humble opinion Illinois will find a way to reduce benefits in the years to come. It is inevitable as the spring, summer fall and winter. They are in too deep but there is one hope... Freeze benefits and pray for inflation. Sent from my iPad using Early Retirement Forum.

Are you not aware That Illinois dramatically reduced teacher pensions 4 years ago? New folks are hired under a plan called "Tier 2" and pay in over 9% to the fund while the benefits resemble SS. The main problem is that the plan may not allow school districts to continue to deny SS benefits to teachers because in order to do so, the pension plan must be substantially equal or better than SS, and Tier 2 really isn't. Or so some groups are claiming.

The potential future cost of SS to local school districts (paying the employer share) is an aspect of the problem not often discussed. Local school boards seem to dread having that 6+% employer contribution added to their local costs. OTOH, teachers are absolutely whacko to not be demanding SS. At least in my opinion. Counting on a pension delivered only at the whim of Illinois politicians and no SS is a sure formula for a financially challenged retirement.

[Big_Hitter]

not sure if you guys saw this link


"An average of six Chicagoans have been shot each day this year, up from five in 2014. In its effort to respond to the carnage, the city is hamstrung by obligations to police, the very people it needs to protect the public."


http://www.chicagobusiness.com/artic...citys-response