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Could Pension Reform Mean Higher Taxes?

Updated: Tuesday, August 6 2013, 11:26 AM CDT

So far, both chambers of the Illinois General Assembly have passed their own versions of pension reform, pushed by the Democratic leaders, Senate President John Cullerton, and House Speaker Mike Madigan.

Both proposals worked to reduce the pension liability owed by the state.
Several Democrats have pushed other proposals, including Rep. Lou Lang, that would make Illinois' temporary income tax hike permanent, to raise revenue to make the pension payments.

Those plans haven't received much love from Republicans.

"If the state of Illinois would've paid their fair share the last 50 years, our payment would be $1.4 billion," Republican Rep. Raymond Poe said. "Instead, it's $6 billion. And you can see by the state not putting in their part, we've gotten way behind."

The state income tax increase is set to begin to sunset in 2015, but Poe tells us he could support making that permanent to make pension payments.

"That brings in $7 billion a year now," Poe said. "And if you make that permanent, each year as the economy grows, that increases, so there would be money to actually go ahead and do things we need to do with the state, plus we could get that paid off."

But Poe said the bill would have to designate the extra money to only go toward pension payments.

"That's why you always want to say you will consider," Poe said. "Because you want to see the bill before you vote on it in Illinois, because you want to make darn sure where that money's going to go to."

Poe tells us he would like to see a combination of recent proposals, but anything involving a tax increase may face a long road with fellow Republicans like Sen. Bill Brady.

"I will not extend, as governor, the tax increase that the governor put in place," Brady said. "That's taken a week's pay out of every family's pocket, and devastated business's ability to reinvest capital."

And Rep. C.D. Davidsmeyer wants to see overall state spending addressed first.

"I think before we get too deep into the pension issue we need to talk spending reform," Davidsmeyer said. "Because my concern is that some form of pension reform passes and then that savings goes straight toward more spending."

Several Democrats have also been pushing for Illinois to drop the current straight tax rates and switch to a progressive system, where those who earn more would pay more in taxes.

Poe says he is totally opposed to that idea, even as a method to make pension payments, because he believes it would push businesses and jobs out of Illinois.

The tax increase raised personal income taxes from 3 to 5 percent, but that rate is currently scheduled to drop to 3.75 percent in 2015, and 3.25 percent in 2025.

Corporate income taxes rose from 4.8 percent to 7 percent. That will drop to 5.25 percent in 2015, and back to 4.8 percent in 2025.
Reporting in Springfield, Mike Brooks, ABC NewsChannel 20.

Could Pension Reform Mean Higher Taxes?

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