There's a push to change inheritance laws in the state of Illinois, and an unexpected source is taking up the cause.
You don't usually find Democrats picking up the gauntlet to weaken provisions of a law originally intended to prevent the concentration of capital into hereditary wealthy elites. But State Sen. Dave Koehler of Peoria said there's a sound economic development reason to do so.
"You know what I think the number one reason that people leave Illinois is? I think it's the way we structure our estate tax," said Koehler.
Inheritance taxes are taxes that a person is required to pay on money or property they have inherited after the death of a loved one.
Koehler supports a bill to increase exemption to the estate tax from $4 million to $12 million. He said the federal exemption already is set at $12 million and will go to $12.9 million this year. In Illinois, for estates above $12 million in value, the estate tax percentage goes up as the size of the estate, until it tops out at a 16% marginal tax rate on inheritances of $10 million and higher.
"When you look at that and you look at how many family farms you could save; legacy farms that want to be passed on from generation to generation, we have to do something to correct that," said Koehler.
An estate size of up to $12 million might seem like a lot of money. It is. But Republican State Sen. Sally Turner of Beason in Logan County said it's not as much as it used to be.
"I don't know if you have noticed what farm ground goes for now. It's somewhere up around $20,000 an acre now. Families can't live like that when their loved ones pass away. They can't afford to buy it back. I think that's very important," said Turner.
Koehler said it's not just farmers who are affected, but the families of small business owners, who also might be forced to shut down to pay the inheritance tax.
"I talked with somebody who is a retired teacher who said their accountant tells them if they really want to pass on their family wealth they really need to move to another state. That's driving a lot of decisions. We really need to address that," said Koehler.
Turner said she's heartened about the prospects for passage of the bill when Koehler, the number four person in leadership in the Illinois Senate, gets on board.
