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Why Are States Leaving Billions in Retiree Income on the Table?
Many elderly can afford to pay more in taxes. And with a growing number of needy seniors to support, states can’t afford to pass up that revenue.
Illinois is the national poster child for state budget messes. My home state faces a $7.4 billion general fund deficit and a $12 billion revenue shortfall. One proposed idea for plugging at least part of the horrific shortfall: tax retirement income. But our new governor, Republican Bruce Rauner, has rejected the idea. Illinois exempts all retirement income from state taxes—Social Security, private and public pensions, and annuities. We’re leaving $2 billion on the table annually, according to the state’s estimates. And we’re hardly alone: 36 states that have an income tax allow some exemption for private or public pension benefits, and 32 exempt all Social Security benefits from tax, according to the Institute on Taxation and Economic Policy (ITEP). States currently considering wider income tax exemptions for seniors include Rhode Island and Maryland. With the April 15 tax day just around the corner, it’s a timely moment to ask: What are these politicians thinking? Read more…