Under funded pension plan tidal wave ...

Greencheese said:
Taxing retirement income more or less has to happen, the state can't fix the budget issue with fees and sales tax increases alone. Given that the recent governor election was centered around the "temporary" income tax hike, expanding the taxable base is the best front forward.
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Well, if taxing the pensions is the answer I think most people will find keeping their 3% compounded cola is a better trade off. Do the math.
 
ripper1 said:
I don't see how if they start taxing retirement accounts that public employees would be exempt. That is absurd to me.
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I agree. Lots of sensationalistic comments get flung around on these subjects to stir up emotions and tempers.

Yes, taxing pension income is one way Illinois could increase revenue.

No, public pensions will not be excluded IMHO.
 
Is it Illinois that is considering taxing streaming services like Netflix.

To increase state revenue.
 
steelyman said:
Sigh is right.

One more time: taxing retirement income is tax policy, not a constitutional matter. Tax policy is not under what is referred to as the "impairment clause" in the IL Constitution.
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I'm not really disagreeing with this, but I do think that the distinction will be decided by the IL Supreme Court (if it gets to them).

They may or may not agree with you or me. I'm certain they won't ask my opinion on the matter. And I will not attempt to predict their decision.

I do think a lawyer will likely make the claim that taxing the State pension is impairing it. It's at least a shot at protecting the State pensions from being taxed, and people tend to want to protect their property, and if a lawyer can make a buck by trying, they will.

If the Federal Govt decided to place a 100% income tax rate on SS, effectively making it worth zero, wouldn't you consider the value of your SS to have been 'impaired'? Or would you say, "well, I'm still getting it"?


-ERD50
 
ERD50 said:
I do think a lawyer will likely make the claim that taxing the State pension is impairing it.
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I do think a lawyer will likely make the claim that taxing the State pension is not impairing it. In fact, I'm positive of it.
 
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purplesky said:
Is it Illinois that is considering taxing streaming services like Netflix.

To increase state revenue.
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Do you mean Illinois exclusively or as one of several?
 
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My personal opinion? I think it's a bad idea that my IL pension is untaxed by the State. I've enjoyed (much of my life) the great things about IL and what it offers and I believe I should pay my fair share.

But that's what it is now. I'll do my (maybe) first-and-only Roth conversion in 2015 since IL tax will not be applied, but I will pay another state's tax thereafter.
 
youbet said:
I do think a lawyer will likely make the claim that taxing the State pension is not impairing it.
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No doubt that any claim of taxes impairing the pension will also be challenged by another lawyer on the other side. The lawyers will make money all the way 'round!

In case I wasn't crystal clear to any previous posters, I was just commenting on what I expect could happen. I'm not commenting on the merits (or lack of), just that the arguments will likely be made (if it comes to that).

-ERD50
 
ERD50 said:
No doubt that any claim of taxes impairing the pension will also be challenged by another lawyer on the other side.
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Pretty safe statement since it's already happened..... !!
 
youbet said:
Pretty safe statement since it's already happened..... !!
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I know there have been challenges to changes, but I wasn't aware of the tax issue specifically. When was that?

It's not the first time I've predicted the past! ;)

-ERD50
 
purplesky said:
I thought I heard Illinois is considering it.
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You could also listen to some drunk guy on the next barstool who says, "Well, I got a friend who has a buddy down at the club who says...". Then they run off to an Internet forum to declare "facts" like some wizened old Gandalf.
 
steelyman said:
You could also listen to some drunk guy on the next barstool who says, "Well, I got a friend who has a buddy down at the club who says...". Then they run off to an Internet forum to declare "facts" like some wizened old Gandalf.
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So apparently Chicago has a new "cloud tax" that taxes streaming services like Netflix.
 
Years ago I posted in a financial blog that I could see pension reductions coming..man did I get a tongue lashing... It isn't I told you so... It's about my country on a never ending spending binge... We in the RIP household are financially responsible...



Sent from my iPad using Early Retirement Forum.
 
rayinpenn said:
Years ago I posted in a financial blog that I could see pension reductions coming..man did I get a tongue lashing... It isn't I told you so... It's about my country on a never ending spending binge... We in the RIP household are financially responsible...



Sent from my iPad using Early Retirement Forum.
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Its a sensitive subject. And more complicated than just a government spending binge.
 
With all due respect- it is the height of simplicity
- Spend more than you take in and eventually your Greece. The only complexity are the poor retirees of Chicago, Detroit will and have fought for what is due them. There's a problem though...

Oh the municipality can say we agree to pay 95% of your pension but what happens when the populace up and moves... No income (tax base), no assets of note equals no pension. Simply put: Can you name one ghost town that is paying pensions?

I believe our government should operate with the same fiscal discipline that successful individuals exercise. In my household it means we don't spend what we don't have. Oh and we don't retire with '20 years in'.

Sent from my iPad using Early Retirement Forum.
 
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steelyman said:
My personal opinion? I think it's a bad idea that my IL pension is untaxed by the State. I've enjoyed (much of my life) the great things about IL and what it offers and I believe I should pay my fair share.

But that's what it is now. I'll do my (maybe) first-and-only Roth conversion in 2015 since IL tax will not be applied, but I will pay another state's tax thereafter.
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I agree. Why should anybody get free income. At least this way the wealthy elite has to participate.
 
rayinpenn said:
With all due respect- it is the height of simplicity
- Spend more than you take in and eventually your Greece. The only complexity are the poor retirees of Chicago, Detroit will and have fought for what is due them. There's a problem though...

Oh the municipality can say we agree to pay 95% of your pension but what happens when the populace up and moves... No income (tax base), no assets of note equals no pension. Simply put: Can you name one ghost town that is paying pensions?

I believe our government should operate with the same fiscal discipline that successful individuals exercise. In my household it means we don't spend what we don't have. Oh and we don't retire with '20 years in'.

Sent from my iPad using Early Retirement Forum.
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First of all, I don't know any public employees who retired after 20 years. The fiscal discipline you speak of would have been governments being responsible for their portion of money they were supposed to put into pensions yearly. Instead they took pension holidays and used the money for services, roads, bridges, what have you. That is why Illinois had an artificially low flat tax of 3% for years.
 
ripper1 said:
First of all, I don't know any public employees who retired after 20 years. The fiscal discipline you speak of would have been governments being responsible for their portion of money they were supposed to put into pensions yearly. Instead they took pension holidays and used the money for services, roads, bridges, what have you. That is why Illinois had an artificially low flat tax of 3% for years.
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In NJ I know there are some. Can't say for sure how many, though.
M-I-L put in 240 months and gets two thousand each month from the public fund.
 
I'm one (23+ years, one place). I never made anywhere near a six-figure salary (couldn't see it down the road even with the headlights on bright). But I was in an academic position and valued that environment.
 
Greencheese said:
http://www.nytimes.com/2010/12/23/business/23prichard.html?_r=0
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Prichard, Alabama, is not a city that is "too big to fail".

The following excerpts summarize the story.

This struggling small city on the outskirts of Mobile was warned for years that if it did nothing, its pension fund would run out of money by 2009. Right on schedule, its fund ran dry...

... the retired fire marshal who died in June... was too young to collect Social Security. “When they found him, he had no electricity and no running water in his house,”...​

The pensions were nowhere as generous as we read about in California and bigger cities.

... Its biggest pension came to about $39,000 a year, for a retired fire chief with many years of service. The average retiree got around $12,000 a year. But the plan allowed workers to retire young, in their 50s....

Workers paid 5.5 percent of their salaries into the pension fund, and the city paid 10.5 percent. But the fund paid out more money than it took in, and by September 2009 there was no longer enough left in the fund to send out the $150,000 worth of monthly checks owed to the retirees. The city stopped paying its pensions.​

The problem is also due to demographics.

The city’s rapid decline began in the 1970s. The growth of other suburbs, white flight and then middle-class flight all took their tolls, and the city’s population shrank by 40 percent to about 27,000 today, from its peak of 45,000. As people left, the city’s tax base dwindled.​

Demographics problem will hit all developed countries in the next few decades, though it will not be as bad as above.
 
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