Illinois lawmakers are proposing to increase the estate tax to fund expanded disability benefits, but opponents say that may cause the state's wealthiest earners to flee.
H.B. 3920, introduced by Rep. Barbara Hernandez (D), would levy an additional 5 percent tax on estates worth $4 million or more and use the revenue to fund a monthly supplemental payment of $279 to residents who already receive federal Supplemental Security Income (SSI) grants.
The bill was assigned to the Revenue and Finance Committee on March 16, and additional representatives have signed on as sponsors in the past week, including Edgar Gonzalez Jr. (D), Kelly Cassidy (D), and Delia Ramirez (D).
Illinois is one of 13 states that levies an estate tax, according to the Tax Foundation. The graduated tax has a $4 million threshold and is levied at rates ranging from 0.8 to 16 percent.
H.B. 3920's proposed 5 percent increase has drawn rebuke from some business groups, including the Illinois Chamber of Commerce.
Chamber President Todd Maisch told Tax Notes on March 16 that the bill could end up causing the state’s wealthiest residents to relocate to states with lower estate taxes. He also said Illinois is due to receive $7.5 billion in aid from the American Rescue Plan Act (P.L. 117-2) signed March 11 by President Biden.
“This is a great idea as long as you want fewer and fewer individuals with wealth to stay in Illinois,” Maisch said. “To blithely assume that successful business owners will stick around to have the state rob their heirs is beyond foolish, especially when the state is waiting to receive $7.5 billion of borrowed money from the federal government that those same heirs will be repaying for generations.”
Illinois is expected to receive $7.38 billion in state aid and $5.74 billion for local government aid, a Tax Foundation analysis of P.L. 117-2's distribution indicates.
The Chicago Disability Activism Collective says the additional challenges the state's disabled population has faced during the COVID-19 pandemic make the legislation’s additional benefits imperative.
“People on SSI currently receive $794 a month and that is clearly not enough to live on, especially when the cost of living continues to rise,” collective member Justin Cooper told Tax Notes March 16. “We hope [the bill] can give folks additional funds so that they can continue to have access to the communities we live in and the services we need.”