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Lawmakers Willing To Wait To Revive Estate Tax

By   /   January 21, 2010  /   2 Comments

By Kristi Eaton                       217-960-1332


SPRINGFIELD — The Illinois Legislature continues to take a wait-and-see approach on breathing new life into a law that could cost the state nearly $300 million in revenue to the state each year.

A quirk in Illinois law had the estate tax dying at the beginning of 2010. From all indications, when lawmakers return to Springfield next month, they are going to wait to see what happens at the federal level before taking any steps to revive the tax — a decision that could cause the state to lose millions each week.

“There’s a discussion underway, but no plan,” said House Majority Leader Barbara Flynn Currie, D-Chicago, when asked about plans to introduce new legislation.

She said the legislature is prepared to act if needed but is not sure when that will be.

“Ultimately it will be a high priority,” she said.


Like Currie, Senator Louis Viverito, D-Burbank, said there have been discussions about possible legislation, but it is far from concrete. There is also talk about a progressive income tax where those who are poorer pay less than those who earn more, said Viverito, the chairman of the Senate’s Revenue committee. Many other lawmakers would need to be lobbied, as well, before moving ahead, he added.

Illinois stands to lose as much as $300 million in revenue each year if the tax is not revived, according to the Illinois Attorney General’s office, which administers the tax.

“Because the Attorney General’s Office collects the estate tax we have advised the legislature on the financial impact on the state of Illinois without an estate tax in place for 2010,” said Scott Mulford, a spokesman for the Attorney General’s Office. “However, it is up to the legislature to decide whether or not to pass legislation that would continue the estate tax collections in 2010.”

Illinois’ estate tax is intertwined with the federal estate tax. For example, in 2000 Illinois law reflected federal law. Back then, only estates valued at more than $650,000 could be taxed.

But in 2001, Congress passed legislation to gradually phase out the tax and abolish it all together in 2010. For example, in 2009, the federal exemption rose to $3.5 million per individual, or as much as $7 million per married couple.

But in 2002, Illinois lawmakers, fearing the loss of revenue, chose to partially decouple from the federal guidelines and write their own rules.

When the state legislation was passed, Illinois decoupled from the gradual phase out of the estate tax, but not from the elimination of it on Jan. 1, 2010.

The federal tax law expired Jan. 1, 2010, and Congress has not taken any action to revive it. Neither has Illinois.

A new law could retroactively collect taxes for any amount of time the law was not in effect, noted Currie, who supports the concept of an estate tax and was the House sponsor of 2002 legislation to decouple from federal estate tax guidelines.

With the state’s budget shortfall currently around $13 billion and climbing, even lawmakers favoring low taxes are noticing the importance the loss of the estate tax could have on the state’s precarious finances.

Rep. Mike Boland, D-Moline, said he supports low taxes, “but we’re in a financial crisis right now, so it’s probably not good that any tax at the present time is cut down until we can get out of this mess we’re in.”  

Because of the lag time in collections, the state’s revenue is safe — for now, said Jim Muschinske, revenue manager for the Commission on Government Forecasting and Accountability, the state’s economic forecasting arm.

There is a nine-month lag, meaning the state will continue to collect taxes until September and the lack of a set law will not affect state collections during this fiscal year, Muschinske said. The state is expected to collect approximately $265 million this year from the estate tax.

“There’s no issue for this fiscal year,” he said. “If there’s legislation needed to maintain the estate tax, there’s probably a high likelihood [action will take place], especially with the state of finances in the state, that every effort will be made to make sure that gap doesn’t occur.”

The Illinois Farm Bureau, a strong opponent to the estate tax because farmers are often cash poor but land rich, is lobbying at the federal level to include exemption guidelines, said John Hawkins, a spokesman for the Illinois Farm Bureau.

Although they are working at the state level to have their voice heard, the organization has placed lobbying at the federal level one of their main goals for the year, he said.

“We’re putting more pressure on the federal side, and then we’re working on the state level as well, but it’s kind of automatically set up, so we’re going to put more emphasis on the federal,” he added.


Ben formerly served as staff reporter for Watchdog.org.

  • Sean Noble

    An important clarification for this article: Illinois’ revenue shortfall stands at about $13 billion, not $13 million – a simple typo, but obviously an enormous difference. (More detail at http://voices4kids.org/getinvolved/files/FY11walkup110309.pdf)

    Continuing loss of revenues already has resulted in about $1 billion worth of cuts in education, health and human services this year. Without a more balanced approach that would include new revenues, Illinois in FY11 will have to slash 12 times the amount we cut from vital services in FY10. And unlike this year, schools’ lifeblood – general state aid – will have a bead drawn on it.

  • Sean Noble

    Thanks for making that “million” to “billion” edit –