By: Mark Glennon*
Leave it to the Center for Tax and Budget Accountability to suggest another way to drive taxpayers out of Illinois, especially big taxpayers.
Last week the progressive, public union-friendly CTBA released a detailed proposal to expand Illinois’ estate tax by lowering the “exclusion amount” thereby subjecting more Illinois estates to the tax.
Today, Illinoisans’ estates with net assets in Illinois assessed at $4 million or higher face a tax ranging from 0.8% to 16%. Same for nonresidents who have physical or real property in the state valued at more than $4 million.
The CTBA wants Illinois to lower that $4 million exclusion, perhaps to as little as $1 million.
Nowhere in its report does the CTBA show any concern that its proposal will drive more taxpayers from Illinois. There’s no adjustment made to account for declining income, sales and other taxes that would result from giving Illinoisans more reason to leave. Instead, the CTBA appears to be sticking to its longstanding view that high taxes don’t contribute to interstate flight.
Ironically, it released its report the same week the Internal Revenue Service released its annual migration report, this time with the most dismal results yet for Illinois. The state lost a net 105,000 taxpayers and dependents for 2020, the IRS says, who took with them a record $10.9 billion of adjusted gross income. Since 2020 Illinois has lost a cumulative net $560 billion of adjusted gross income to other states. Our detailed report on the IRS numbers is here.
Flight from Illinois is increasingly concentrated in the wealthy, the new IRS numbers indicate. While the IRS data is about income and the estate tax is about wealth, which are different concepts, the IRS numbers still tell us something. First, more tax filers in the IRS’s top category, which is incomes over $200,000 per year, fled than ever before, as shown in the first chart.
Second, the incomes of people fleeing is far higher than those coming in, and the gap is growing, as shown in the second chart.
The cosmetic, political attraction of stiffer, state estate taxes is predictable. Worsening inequality in wealth and income is among the biggest challenges of our age.
That’s an exceptionally complicated issue to discuss another day, but clearly some solutions just won’t work at the state level, and estate taxes are among the most conspicuously senseless. It’s just too easy for many wealthy residents to flee to another state, which is why only 11 other states have an estate or inheritance tax. A major exception is family farmers, who can’t flee. That’s why farmers understandably are among the biggest opponents of the Illinois estate tax at any level.
We have a federal estate tax. Assuming you want to tax wealthy estates, it has to be done at the national level.
My entirely personal view, for whatever it’s worth, is that a federal estate tax in some form at some level may be sensible but nobody should let it get to that point. Andrew Carnegie had it right when he said, “He who dies rich dies disgraced.” Give it away smartly at or before death. It will be better spent that way than letting the government spend it.
*Mark Glennon is founder of Wirepoints.
Audio and summary 
If this bill passes, say goodbye to local control over all Illinois parks and expect to see open drug and alcohol use, needles, no sanitation and fire hazards, but no ordinary park users.
Lets hope none of JBs offshore ‘Pritzker Family Trust’ estate $billions$ are at risk if estate tax laws are changed…as the dem party locally & nationally wouldn’t know what to do
Looking at the income gap chart, at what point does it become so wide that citizens storm Springfield with pitchforks and torches? I don’t think enough pain has been inflicted yet. We still have a long way to go and the rich won’t become victims of CTBA’s scheme. They will find tax gimmicks and loopholes and will exit long before the scheme becomes reality. Instead, the CTBA’s scheme will confiscate much of middle class wealth as does the income tax.
so essentially, by lowering estate tax $4 mil exclusion to $1 mil, they’d be taxing the middle-class assets at death to for the most part pay for the TIER I tax free $multi-millionaire$ upper-class deals for are public sec heroes (many of whom don’t even live in the state so they’re assets will be free from taxation at death)?…and that’s equity Illinois style
There’s all kinds of talk about ‘generational wealth’ and how it is inequitable that white/asian communities have generation wealth but black/brown communities do not. The CTBAdocument is titled: “Reforming the Illinois Estate Tax to Advance Tax Equity and Fund Public Services”.
Like all communists, they believe no one should have generational wealth, because that’s inequitable. The government should take it all. The CTBA didn’t say this part out loud, but underneath it all, they believe that if black/brown people cannot have generational wealth, than no one should.
Lookin’ at you JB.
Something sinister about a philosophy that states the government should take an ever-increasing portion of your money until your behavior changes. “Tax ’em ’til you break ’em” isn’t exactly the most Christian way of going about things.
Progressive Democratic leaders, just like the STI herpes, the gift that keeps on giving, or should I say taking.
Union racketeer funded disinformation can be dismissed as automatically a fraud
Next up, taxing the IRA distributions of people over 59.5. Currently, Illinois is a 0% tax state for those. They will propose taxing them, but NOT taxing public pensions at the same time.
Ralph Martire is a fraud. He clams that the CTBA is bi-partisan but any of the so called Republicans are nothing but RINO hacks. Furthermore, none of his/CTBA’s positions are bi-partisan. He should change their name to the Center for Tax. That would be the first time he ever was honest.
Farmers can flee just like anyone else. Sell the farm and leave, buy another farm in another state. The only fair tax (if there is such a thing) is one that is applied equally. Illinois will always be broke if the government has any say in it.
Much more difficult to do that, especially if you have been farming your ground for years and years. There are lots of fixed costs and things farmers do to “customize” their farm to the ground they farm
Plus, most farmers rent most of their farmland from local owners who are generally more receptive to doing so with other local people they’ve known and with whom they’ve had some kind of positive relationship going on for a long, long time. Strangers seeking to rent are not going to be able to compete in most cases.
That is true of any family business of any kind. I am against the tax for sure. But if it is going to be apply it fairly across the board.
Another good article Mark. Illinois is one of the highest tax jurisdictions for living taxpayers in the country and we’re still broke. They then want to double down and fleece the dead! Why can progs ever learn?
IMO its pretty clear Dems are terrible at managing the business of government esp. in Illinois.
Vote with your feet and get da hell out of Taxistan.