The Illinois Policy Institute’s Brad Weisentein wrote at RealClearMarkets last week that there are at least 32,000 former government workers in the state of Illinois who can claim $100,000+ income from the state’s pension systems. Of the state’s 239,384 pensioners, Weisenstein reports that their average annual retirement income amounts to $93,558.
It’s worth adding that according to Weisensein, 58 is the retirement age for Illinois state workers versus the traditional 65 in the private sector. It’s not just that state work pays big in retirement (Weisenstein estimates $2.48 million per retiree for the life of the pension), it’s that the high pay surely sidelines more than a few otherwise capable workers. Readers in their 50s surely understand the meaning of the previous assertion.
The obvious question with all of this is why, but instead of asking questions this opinion piece will simply comment that what Weisenstein understates as “excess” in the state of Illinois more crucially speaks to what results when the rich are wildly overtaxed. All of which calls for a different way of looking at local taxation, but also national.
For too long, Republicans known to favor lower rates of taxation have missed the point. Think about it. The income tax rate in Illinois is 4.95%. That’s the flat rate, and that’s the problem. It is because 4.95% of the income earned by the richest Illinoisians is exponentially more than 4.95% of the income earned by the richest West Virginians or Mississippians. This isn't said enough locally, or nationally.
It's a long or short way of saying that absent caps on what local, state and federal governments can extract from the citizenry, stories of excess will continue to reveal their ugly selves. Stating what should be obvious, the roster of $100,000+ state retirees in Illinois will continue to grow so long as Springfield arrogates to itself a flat, 4.95% of the private income of some of the richest workers in the U.S.
Precisely because the most productive workers in Illinois earn in gargantuan amounts, the state’s take will continue to grow as will grow its ability to shower gilded retirement income on former state employees who will earn much more not working for the state than they did while working.
All of which speaks to the importance of limiting the federal government’s take of worker pay far more than the tax code presently does. Among other things, it calls not for a SALT deduction, but a SALT credit. Anything to limit the flow of dollars to the U.S. Treasury. An Illinois pension system defined by excess shows why.
While it’s likely true that West Virginia, Mississippi, and other poorer U.S. states lack sufficiently rich taxpayers to pay out sizable retirement income to their state workers, other states like Illinois, California, New Jersey, and New York do. And the more the money of the richest, highest-taxing states flows to the U.S. Treasury, the more Congress is capable of “doing” for West Virginians, Mississippians and others what taxpayers in state cannot.
Which is a long way of reminding readers that SALT deductions don’t “subsidize” high tax states, rather they place a fence around them so that their tax dollars don’t as easily flow to Treasury so that Congress can harm poorer states with the spending that presently burdens high tax states.
Lest Republicans and conservatives forget, government spending is costly and damaging. See Illinois and its pension systems. A SALT credit would help keep these bad ideas in Illinois.
