Should Illinois Tax Retirement Income?

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Earlier this month, Illinois Senate President John Cullerton suggested that limiting the state’s generous income tax break for retirement income “would just be a matter of fairness.” Senator Cullerton’s suggestion gives Illinois policymakers a welcome opportunity to reflect on the appropriate design of senior-citizen income tax relief in Illinois. This paper summarizes the mechanisms used in Illinois and in other states to reduce senior citizens’ income tax liability, and provides a menu of options for reforming the current system.

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