SPRINGFIELD – After the federal government and the majority of states have scrapped it, should Illinois do away with its estate tax?

The nonprofit Civic Federation asked the question in an analysis of the estate tax earlier this month.

“Because most states no longer have an estate tax, there is an incentive for some wealthy people to structure their assets to avoid paying it in Illinois. Strategies include setting up trusts, giving away assets before death and moving to other states,” the report read. “Unlike with other taxes, Illinois cannot recoup revenue lost to tax avoidance by simply lowering its rate – the competitive rate is 0 percent.”

Thirteen states still have an estate tax. Illinois and nine others have the second-highest top rate, the Civic Federation report said.

Many states, including neighboring Indiana in 2013, repealed their estate taxes to continue to conform to the federal tax code.

While supporters of them see it as a way to tax only the extremely wealthy as they pass their seldom-taxed fortunes onto the next generation, some small business owners have found themselves facing hefty tax bills when the head of the business dies.

National Federation of Independent Business’ Illinois chapter Director Mark Grant said many small businesses are “asset rich but cash poor” at the time an estate tax is levied, forcing them to liquidate at a vulnerable time for the company.

“Taxes have already been paid by the businesses and the families throughout the years of that business being in existence,” he said. “Just because someone passes away, that means the government needs to be able to come in and take more away from the people who’ve most likely worked in the business since they were kids? That’s just wrong.”

One small business organization in Illinois is notorious for being asset-rich but cash-poor: Farmers.

“It’s one of the most unfair taxes out there for our members,” said Kevin Semlow, director of state legislation for the Illinois Farm Bureau. “You have to sell the factory which allows you to make a living. Without the land, you can’t make it work. It’s just a very detrimental tax on farmers that have already paid taxes on that land.”

Semlow gave a number of instances in which he’d spoken to family farms forced to sell off a parcel of land to cover a tax bill when the landowner in the family died.

State Rep. Charlie Meier, R-Okawville, is a farmer. He told Illinois News Network in April that he’d seen farms with Illinois’ Centennial Farm designation, meaning the plot had been in the family’s name for at least a century, partially sold when the figurehead died, leaving a tax bill for the heirs to pay.

“We don’t think of [farmland] as an asset. It is a family member,” he said. “It is the one that has provided for this family for generations.”

The Civic Federation said the state would be hard-pressed to repeal the revenue stream without finding something else to tax as a replacement, even though the estate tax is one of the most volatile revenue streams for state coffers, according to a 2014 report by the Commission on Government Forecasting and Accountability. 

Attorney General collections of estate tax by year: 

• 2012: $273 million
• 2013: $243 million
• 2014: $317 million
• 2015: $341 million
• 2016: $317 million
• 2017: $254 million