If approved, an increase to the Illinois estate tax would cause wealthy residents to move out, the Illinois Chamber of Commerce president says. | Adobe Stock
If approved, an increase to the Illinois estate tax would cause wealthy residents to move out, the Illinois Chamber of Commerce president says. | Adobe Stock
Illinois Chamber of Commerce President Todd Maisch said legislation increasing the estate tax would lead high-dollar earners to leave the state, even though it was designed to help the disabled population.
The bill would double the state tax — from 4.95% to 9.95% for those who have more than $4 million. Lawmakers want to rework the estate tax to provide monthly payments of $279 to the 270,000 residents and 84,000 undocumented immigrants who are disabled. The additional monthly payments would go to individuals who receive Supplemental Security Income, bringing them above the poverty level.
The chamber president, however, would not endorse the proposal.
"This is a great idea as long as you want fewer and fewer individuals with wealth to stay in Illinois," Maisch said in the statement to Crain's Chicago Business for its March 15 report.
Illinois is already losing higher-earning residents to out-migration, according to data from the IRS last year. The Illinois Public Policy Institute reported that since 2011, the state has lost $14.1 billion of gross income on the net because residents have been fleeing the state. The institute also reported Illinois lost $3.4 billion of income from companies that fled to other states.
The estate tax would incentivize people with more than $4 million to leave the state. The state still wouldn't tax for less than $4 million. The bill is scheduled to go before the House Rules Committee on March 26.
"To blithely assume that successful business owners will stick around to have the state rob their heirs is beyond foolish, especially when the state is waiting to receive $7.5 billion of borrowed money from the federal government that those same heirs will be repaying for generations," Maisch said.
Forbes has listed Illinois as one of the states not to die in because of its estate tax. Illinois is among 17 states and Washington, D.C., which all have an estate or inheritance tax separate from the federal estate tax levy.
The federal estate tax tops out at 40%, but the 17 states, Illinois included, have additional taxes.
Twelve states have estate taxes, along with Washington, D.C., while six states impose inheritance taxes. Maryland is the only state that taxes both estates and inheritance.
More and more states are moving away from taxing estates and inheritances or have raised the exemption levels, while Illinois is going in the opposite direction if the bill proposing doubling the estate tax passes.
In 2017, the Tax Cuts and Jobs Act raised the estate tax exclusion from $5.49 million to $11.2 million per person. That provision expires in 2025.
Hawaii and Washington have the highest estate tax rates at 20%, and eight other states and Washington, D.C. come in second at 16%. Massachusetts and Oregon have a $1 million exemption level, which is the lowest, while Connecticut is $7.1 million — the highest.
Illinois' current rates are at least $4 million and the tax is 0.8% at the lowest and 16% at the highest.
Nebraska has the highest top rate for inheritance taxes at 18%, while Maryland imposes 10%. Spouses are exempt in all of those states that have an inheritance tax.
Rep. Will Guzzardi (D-Chicago) told Crain's the caucus has not reviewed the estate tax bill yet but may support it after they review it.
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