How did we get here? On January 12, just hours before the end of the two-year legislative session, Democrat legislative leaders hiked the state’s personal income tax rate from 3 percent to 5 percent – an increase of 67 percent. The state’s corporate income tax rate increased from 4.8 percent to 7 percent – an increase of 46 percent.
The legislation was approved without the support of a single Republican in the Senate or the House, and Governor Pat Quinn signed the measure into law the following day. The same legislation also reinstated the Illinois estate tax for the estates of persons who die in 2011 and thereafter, once again linking death and taxes in Illinois.
Only 17 states impose their own estate taxes. Illinois imposes an estate tax on estates valued at more than $2 million. The applicable rate depends on the size of the estate and increases with the size of the estate, starting at 8 percent and going as high as 16 percent, on top of the federal 35 percent death tax rate.
Until 2005, the amount of the Illinois estate tax could be taken as a full credit against the federal estate tax liability. In 2005, that was changed at the federal level to a deduction from the taxable estate for the calculation of the federal estate tax liability. This change necessitates a complicated back-and-forth calculation before the final tax liabilities are settled.
Estate taxes this high are quite burdensome and force people to either give away assets to family members or charities, thus reducing the value of the estates and their subsequent tax liabilities, or to establish residency in another state that does not have this kind of tax burden.
Wrong policies and failed leadership have left Illinois state government in the midst of its worst-ever financial crisis. Hard-working taxpayers and employers are being asked to pick up the tab for eight years of overspending.
This massive tax hike and the reinstatement of the state estate tax will have a devastating effect on Illinois families and employers who have been cutting their budgets and struggling to make ends meet. Repeal of the estate tax may not happen this year, but it needs to happen. We are taxed on our income, our property, and our purchases. Illinoisans should not be taxed on dying here too.