In politics, a gaffe has come to be defined cynically as accidentally telling the truth.
Did he commit a gaffe? Or didn’t he?
That’s the question surrounding state Treasurer Michael Frerichs’ recent comments before the Des Plaines Chamber of Commerce about taxing retirees’ income.
Here’s how the Arlington Daily Herald reported what transpired when Frerichs, an enthusiastic supporter of the proposed progressive income tax amendment to the Illinois Constitution, made a joint appearance with Illinois Chamber of Commerce CEO Todd Maisch, an opponent of the amendment.
“Frerichs added one argument for the progressive income tax is taxing retirement income of those who can afford it. He said he knows people who receive six-figure yearly pensions and do not pay (state) income tax, but the current system doesn’t differentiate between them and retirees who barely get by on their savings or pensions.”
“‘One thing a progressive tax would do is make clear you can have graduated rates when you are taxing retirement income,’ he said. ‘And, I think that’s something worth discussing.’”
From a factual perspective, Frerichs’ statement was totally unremarkable — it was merely an acknowledgment that passing a constitutional amendment replacing the current flat tax mandate with a progressive one would give legislators great flexibility in setting a variety of tax rates in choosing the levels and types of incomes to tax.
But from a political standpoint, critics interpreted Frerichs’ statement of the obvious as a horrendous mistake.
“Frerichs steps on third rail,” stated a headline on the CapitolFax website.
“His suggestion plays right into the opposition’s rhetoric,” wrote CapitolFax Publisher Rich Miller, a veteran observer of Illinois politics.
The alleged political mistake follows along this line: Under no circumstances are proponents of the progressive income tax plan to acknowledge that retirees’ income — including lucrative state pension payments — might become a target of revenue-hungry legislators.
Why? Because retirees vote in greater numbers than other segments of the voting population, and they’ll potentially be repelled by the idea of supporting a progressive income tax that could cost them a whole lot of money.
Voters will decide the issue in the November election, and the measure requires a super-majority to become law. So if seniors vote in disproportionate numbers against a progressive income tax, it will be much harder for it to pass.
Gov. J.B. Pritzker desperately wants the progressive income tax to become law, and he’s prepared to spend many millions of his multibillion-dollar fortune to get it done. He sees it as key to gaining access to billions of dollars in new revenue to support his spending plans.
So far, proponents are sticking to the argument that Pritzker and legislators will only raise taxes on “millionaires and billionaires,” not middle-income earners. Indeed, they’ve already passed legislation that hits those with incomes above $250,000 with higher tax rates.
But, as Frerichs notes, passing a progressive income tax would allow legislators to target retirees’ income, as they can do now under the flat tax system, by placing higher income tax rates on higher levels of pension income.
Illinois currently has a flat tax rate of 4.95 percent.
Quentin Fulks, chairman of the Vote Yes for Fairness Committee, has emphasized that Pritzker’s current progressive income tax plan “does not tax retirement income,” and he’s right.
But that doesn’t mean, as Frerichs noted, that it could not be revised to set a variety of rates on a variety of levels and types of retirement income.
There’s a reason why opponents of the progressive income tax amendment call it the “blank check” amendment. It would give legislators a totally free hand to set a variety of tax rates on a variety of levels and types of income.
Given Pritzker’s spending plans combined with state debts, financial experts have argued that the progressive rates now scheduled to go into effect if the amendment passes won’t generate anywhere near enough revenue. That’s why they say legislators will inevitably raise progressive tax rates on middle-income earners and/or target new sources of revenue that include retirees’ income.
But back to the original question — did Frerichs err by speaking truthfully to his audience about tax options if the amendment passes?
Not by our lights. His candor is commendable. It’s too bad so few public officials follow that example.