(The Center Square) – While President Donald Trump’s recently signed “big beautiful bill” raises the federal estate tax exemption, offering relief to family farms and small businesses nationwide, Illinois has yet to follow suit.
With one of the lowest state estate tax thresholds in the country, Samuel Karnick, senior fellow at The Heartland Institute, warns Illinois’ outdated estate tax continues to threaten the future of generational farms, even as the federal government moves to ease the burden.
“If you raise the exemption from $5 million to $15 million, more farms are protected, but it becomes a value judgment,” said Karnick. “Why should a $15 million farm be taxed while a $5 million one isn’t? Eliminating the estate tax entirely would be far more beneficial to the state’s economy.”
According to Alex Muresianu of the Tax Foundation, very few estates actually end up paying the federal estate tax. In 2022, only about 3,000 estates, just 0.1% of all deaths, owed any estate tax. While around 8,000 estates were required to file returns, only a small number were farms. In fact, just 112 of those taxed were in agriculture-related sectors like farming, fishing, or forestry.
“Compliance costs are likely very high for those few who do file,” said Muresianu. “And in states with lower estate tax thresholds than the federal level, like Illinois, more families, including family farms, end up paying the tax.”
Trump’s newly signed “big beautiful bill” raises the federal estate tax exemption to $15 million per estate, or $30 million for couples, and permanently eliminates the sunset clause.
Karnick said the best fix isn’t a higher threshold, but full repeal.
“Yes, the state would lose revenue short-term,” Karnick said. “But over time, you get more production, more private-sector activity, and more economic growth. That’s what expands your tax base, not driving family farms out of business.”
Illinois farm families remain burdened by one of the nation’s lowest state thresholds. Illinois’ estate tax threshold is $4 million, far below the $15 million federal exemption. A bill at the Illinois Statehouse backed by both Republicans and Democrats would raise the farm exemption to $6 million but remains in committee. Karnick questioned why transferring assets from parent to child should be taxed in the first place.
“When they say we’ll raise the threshold, I think what they’re trying to do is square the circle. So when you say, ‘okay, we’re going to raise the cap,’ what you’re saying is that ‘we found more farmers we’re going to say we care about. We care about their farms enough to stop taxing them when they try to pass them on,’” said Karnick.
Muresianu said the economic benefits of repealing the federal estate tax may be relatively small, but doing so would eliminate steep compliance costs, estimated at around $20 billion annually as of 2022.
