Emanuel fires back at Lightfoot's pension problem characterization

CHICAGO (WLS) -- Outgoing Mayor Rahm Emanuel is taking issue with comments from Mayor-elect Lori Lightfoot about the city's pension problem.

Lightfoot characterized the issue as "worse than expected" with the city facing $28 billion in outstanding obligations, but Emanuel said there's nothing about the city's financial situation that should surprise his successor.

"They know everything about the finances because it's in the transition reports, OK? It's not a surprise to anybody," Emanuel said.

Lightfoot's comments raised a few eyebrows on Thursday, her last day in Washington D.C.

"It's much more substantial than I think has been socialized in either the public or the media," she said.

Ralph Martire, executive director for the Center for Tax and Budget Accountability, agreed with Lightfoot.

"If she's looking at the entirety of the circumstances, her revenue sources available to deal with the problem, if you put it all together it's probably worse than she thought, and I would give her that," he said.

Lightfoot said dealing with Chicago's pension debt will require creative solutions. Mayor Emanuel has floated the idea of taxing retirement income over $100,000. It's an idea Martire says makes sense.

Martire also suggested another consideration for Lightfoot: A sales tax on services like haircuts and auto repair work, which could bring in an estimated $300-400 million in new revenue.

"Services now make up well over 73 percent of all the transactions in our economy, that's what we don't tax," Martire said. "What we do tax is goods, the sale of goods. The sale of goods only makes up 17 percent. You just can't leave the largest and fastest-growing segment of your economy pretty much entirely out of your tax base and have a revenue system that's going to work."