Illinois must spend $4.9 billion more per year to pay for its pensions, but the “millionaires tax” would only raise about $3 billion to $4.3 billion. This is too little for the pension budget and would leave nothing for property tax relief.

Supporters of a campaign to eliminate Illinois’ constitutionally protected flat income tax and add a 3 percent income tax hike for those earning more than $1 million say the increased revenue could be used to lower property taxes.

Don’t count on it.

The analysis shows that any new revenue from the tax would likely be consumed by Illinois’ growing pension crisis. That would leave nothing for property tax relief. It would also expose other taxpayers to a much larger income tax increase.

Illinois’ five state-run retirement systems currently receive nearly $11.2 billion in annual funding from the state budget, representing more than 20 percent of the state’s general fund budget . Despite these massive contributions, state actuaries said contributions would actually need to amount to nearly $16.1 billion a year for the state to pay off its pension debt.

In other words, Illinois lawmakers are closely bypassing the systems $4.9 billion every year. Each year the state fails to make a full, actuarially determined contribution, the more likely it is that the state’s $142 billion pension debt will increase along with the amount required each year to repay that debt .

Illinois’ retirement crisis is the main reason the proposal to eliminate the flat income tax protected by the Illinois Constitution and add a 3% income tax increase for Those earning more than $1 million would fail to provide the promised property tax relief. Estimates based on the most recent Illinois tax filing data available and requests from the Illinois Department of Revenue under the Freedom of Information Act show that the “millionaires tax” could raise between 3 and $4.3 billion in additional revenue, assuming no negative economic effects or changes in tax filings. the increase in taxes. Even under the most generous revenue assumption, the proposal would still be $570 million short of allowing the state to begin paying a true full pension and perhaps as much as $1.87 billion short of what is required.

Illinois’ pension costs completely dwarf the maximum revenue the tax hike could hope to generate. Worse, the most recent budget forecast from the Governor’s Office of Management and Budget estimates that Illinois faces a budget deficit of more than $1.4 billioncreating additional costs that would likely need to be resolved before lawmakers can even consider the idea of ​​passing increased revenue to local governments to provide property tax relief.

At the local level, where property taxes are directly determined, local governments themselves face a growing pension crisis. Local governments in Illinois have more than $68 billion of local pension debt in their own retirement systems, according to the most recent biennial pension report from the Illinois Department of Insurance.

Rising pension costs at national and local levels partly explain why, despite almost 15 billion dollars increase in annual state revenues since 2019, the a typical homeowner’s property tax bill increased by $756.

The increase in state revenue has already not made it possible to substantially and permanently reduce property taxes. Illinoisans should consider the potential for higher taxes on everyone when deciding whether the “millionaires tax” is right for Illinois.