House Bill would repeal Illinois estate tax, protect family farms

Illinois is one of just a handful of states that double-taxes people when they die by imposing its own estate tax atop the federal tax. A bill that would repeal Illinois’ estate tax could save family farms.

Selling family farmland to pay Illinois’ estate tax could end if a new bill takes root in the General Assembly.

Illinois is one of the few states that piles an estate tax atop the federal tax paid by heirs, and on much smaller estates than those taxed by the federal government. House Bill 1454, introduced by state Rep. Avery Bourne, R-Raymond, would repeal Illinois’ estate tax.

The bill’s intent is to save family farms. When the owner of a farm dies, the heirs are faced with a combined tax rate of up to 56 percent of the land’s value. The federal estate tax takes 40 percent and Illinois’ tax can range from 0.8 percent to 16 percent, according to the Tax Foundation.

“The estate tax in Illinois, especially at a time when small farms are struggling to stay afloat, often means that families must sell the family farm to meet their tax obligations. This adds to the overwhelming tax burden in Illinois,” Bourne has previously stated. She grew up in rural Montgomery County, where her family has farmed for generations.

Bourne’s bill has attracted six Republican co-sponsors, as well as state Rep. Jonathan Carroll, D-Northbrook.

Illinois taxes estates valued at $4 million or more, which would be roughly the value of only 500 acres of farmland. The federal tax starts on inheritance per person of $11.4 million or greater.

Illinois is one of 17 states, plus Washington, D.C., that collects either an estate or inheritance tax. Neighboring states of Wisconsin, Missouri, Michigan and Indiana don’t impose those taxes, and Indiana repealed its “death tax” in 2013.

States have been trending away from death taxes, with recent repeals in Tennessee, Delaware and even New Jersey. New Jersey and Illinois are often tied at the ugly extremes when ranked for taxing residents and fiscal irresponsibility.

Death taxes “have large compliance costs, have been shown to suppress entrepreneurship, and are among the most harmful taxes to economic growth,” according to the Tax Foundation. Most states seem to have realized that.

In 2005, the federal government got rid of its estate tax credit for state inheritance and estate taxes paid, prompting states to repeal or lower their death taxes. Illinois remains a holdout, but lawmakers could fix that by sending HB 1454 to the governor’s desk.