I hope that you had a wonderful and safe Fourth of July, celebrating with family and friends. I write to you today with updates regarding energy, the environment, and taxes. But first, I’d like to share with you a couple of local stories.
Thank you for reading, and I’m grateful to serve as your State Representative.
State Representative David Friess
Severe storms ripped through Illinois last week. The storms included winds that exceeded 100 mph. The storms ripped off roofs, uprooted trees and downed countless power lines. In the wake of this destruction, thousands of residents from Springfield to Columbia were without power for days. Unfortunately, the winds caused extensive damage to the electric infrastructure in multiple counties. The damage included numerous substations being taken off line and damage to over 1,300 power poles.
I want to thank the over 3,000 workers from 12 states that came to our region to restore power to our residents. Moreover, I want to thank the residents of Southern Illinois for their patience and understanding during this difficult time and Kevin Scheibe, Monroe County Public Safety Director, Office of EMA, for ensuring our seniors stayed safe given the uptick in temperatures.
Randolph County Sheriff’s Office Receives $10,000 Grant
The Randolph County Sheriff’s Office was the recipient of a $10,000 grant for use in obtaining new ballistic plate carrier vests and Kevlar helmets for its patrol deputies. Sheriff Peters expressed gratitude that his Deputies would be outfitted with the appropriate safety equipment.
“The Randolph County Sheriff’s Office and the County of Randolph are a great partner because of its focus on safety and training. With the help of the Illinois Counties Risk Management Trust and Sheriff Peters, the county continues to ensure the safety of the public and law enforcement officers while conserving taxpayer dollars,” Kevin Kern, insurance agent for Snedeker Risk Management stated.
I’m grateful for the work the Randolph County Sheriff’s Department does across the district I serve. It’s great to know that they will be able to upgrade their equipment and that the patrol deputies will enjoy increased safety in the field.
- Lawmakers look to lift the ban on nuclear energy permits. Illinois lawmakers worked to lift the 36-year-old ban on new nuclear energy construction permits this spring, with Senate Bill 76 receiving bipartisan support and headed to the Governor. Since 1987, Illinois has prohibited new nuclear construction. However, Illinois remains a nuclear power with 11 current operating reactors, the most of any state. Illinois is in the top three states with 54 percent of its energy generation being nuclear, while also having the most generating capacity (11.6 gigawatts) of any state.
Due to a continued ‘War on Coal’ by many Illinois Democratic lawmakers, all investor-owned coal plants must close by 2030 and coal-fired power plants owned by municipalities must reach zero emissions or shutter by 2045. With the demand for electricity continuing to rise and nearly seven gigawatts of coal capacity being pulled off the grid in the next eight years, the General Assembly acted to help ensure the ability to produce sufficient energy safely and efficiently. While this does not do much about the threat of rolling brownouts nor address immediate energy deficits, it is a step toward ensuring future baseload capacity for residents and job creators.
Nuclear energy is a low-carbon energy source that can help reduce greenhouse gas emissions, and it is not dependent on wind or sunlight. Construction of nuclear power plants can stimulate economic activity and job growth, and these power plants can meet a significant portion of a region’s energy demand. The nuclear industry has also made a number of technological advancements and safety improvements over the years.
- Wildfire smoke from Canada is affecting Illinois air quality. Here’s what you need to know. For the second day in a row, all of central Illinois is under an air quality alert because of wildfire smoke filtering down from Canada.
As of Wednesday morning, most of Illinois was still rated “unhealthy” on the EPA’s interactive air quality map, Airnow. Air quality is predicted to improve late today and early Thursday when winds begin shifting from the north to the south. Some of the smoke will be lifted out of the area, though enough will remain that sensitive individuals may still feel the effects, prompting the EPA is extending the air quality warning through 7 p.m. Thursday.
- Illinois taxes on groceries, gas increase on Saturday. Starting July 1st, Illinois residents will begin to pay more on basic necessities such as gasoline and groceries.
Last year, Gov. JB Pritzker signed a temporary initiative, the Family Relief Plan, designed to ease the effects of inflation on residents by suspending the 1% sales tax on groceries and freezing the motor vehicle tax at 39.2 cents per gallon.
On July 1st, 2023, those freezes will come to an end.
- Estate Tax continues to put the future of family farms at risk. House Republicans have made continuous efforts to reduce or eliminate the burdensome ‘Estate Tax,’ known also as the ‘Death Tax,’ with more than a half-dozen bills introduced in the spring 2023 legislative session. And despite Gov. JB Pritzker stating that reducing the estate tax was one of his ‘shared priorities,’ Democrats’ inaction left out any action on all of the bills before final adjournment in May.
An estate tax, or inheritance tax as it is known in other states, is a tax paid by the estate of a deceased person after all debts to the private sector have been paid. In the states like Illinois where it is a law, payment of an estate tax is an essential part of the probate process. In estate tax law, the exclusion amount is an amount that is not considered when an estate is being taxed. The Illinois Estate Tax is a sliding-scale tax on probationary estates, and the tax cannot be levied on that part of an estate that is excluded. The current $4 million State of Illinois Estate Tax exclusion amount was enacted in December 2011 for persons dying on or after January 1, 2013. Prior to this enactment, the Illinois exclusion amount was $2 million.
By contrast, the federal exclusion amount is indexed to inflation. It was $12.06 million in 2022 and that amount has gone up to $12.92 million in 2023. Unless there are further changes to federal estate tax law, that exclusion amount is scheduled to be cut in half in 2026 due to a quirky feature in the law that sunsets the current indexation. Currently, only 17 states charge an estate/inheritance tax, and 33 do not. Iowa is in the process of phasing out its inheritance tax by 2025.
House Republicans proposed bills in spring 2023 to completely repeal the Illinois tax on estates. Other House Republican bills will increase the state exclusion amount from $4 million to $8 million, or raise the exclusion amount to $12 million.
The Illinois estate tax solicits approximately $547 million per year in revenues for the state by making death a taxable event. The tax falls with the greatest weight on property that cannot be moved out of state, including houses, small businesses and farmland.
Nearly 70,000 families own and operate 96 percent of the farms in Illinois, and all of these families are faced with questions when it comes to succession or transition plans for the business. The looming effects of the estate tax can force families to address future plans through gifting, discounting, leasing or some other method.
The threat for family farms and small businesses to either shutter or leave the state due to the estate tax is real. Several states that border Illinois, such as Indiana, Missouri and Wisconsin, do not charge an estate or inheritance tax, and Iowa’s is being phased out.
There are a number of negative effects of having a reduction in the number of family farms in Illinois. These farms play a crucial role in ensuring food security, while providing a diverse range of fruits, vegetables, grains, dairy and meat. They are an essential component of a diverse and resilient agricultural system that benefits society as a whole.
Research indicates that every year, Illinois farmers have to sell acreage and business owners have to sell company assets because a disability or death occurs. A farm or family business should not be at risk of being lost due to the estate tax.
Family farming, it should also be noted, is a significant driver of economic development, particularly in rural areas. It provides employment opportunities, generates income and supports local businesses and services. Family farmers often have a deep connection to the land and a long-term commitment to sustainable agricultural practices. Farmers tend to manage their farms with an emphasis on environmental stewardship, such as soil conservation, water management and biodiversity preservation. They also maintain open spaces, wildlife habitats and ecosystems.
“Small farms and businesses will continue to be punished by the state’s overly burdensome estate tax,” stated Rep. Daniel Swanson. “Farmers should not be faced with making legacy-altering decisions or losing a many-generation family farm. Progress was made on this issue during the spring session, but in the end, nothing was brought forward for a vote.”
By supporting family farms, consumers are promoting vibrant rural communities, protecting the environment, preserving cultural heritage, and ensuring access to high-quality, locally-produced food.
“House Republicans are committed to reforming the estate law in Illinois,” added Rep. Jason R. Bunting. “It doesn’t have to be this way in Illinois. This tax presents a huge financial hurdle for family farms and small family businesses, and in many cases, the burden is too great and sacrifices have to be made.”
What is the Franchise Tax and how does it impact small businesses in Illinois? Small businesses in Illinois face numerous financial challenges, including having to pay an annual franchise tax. The franchise tax is actually three separate taxes, all based on paid-in capital. Paid-in capital is the money investors pay in return for their shares of stock. The paid-in capital is neither revenue nor net worth, it is the equity capital used to build a business.
Under the law in 2019, the annual and initial taxes required payments of a minimum of $25 and a maximum of $2 million. Legislation advanced by the Republicans, passed by the General Assembly, and signed by Gov. JB Pritzker in June 2019 called for phasing out the franchise tax, with total elimination of the tax by 2024; however, in 2021, this law was repealed by Democrats. The three components of the franchise tax took $170 million out of employers’ pocketbooks in FY22, which amounted to 0.34 percent of general fund revenues.
The franchise tax is seen by most economists, including economists favorable to the public sector and its spending needs, as an archaic tax. Research shows that only 16 states currently impose a franchise tax, and of those at least two (Connecticut and Mississippi) are in the process of phasing out their taxes. Complying with franchise tax requirements in Illinois saddles small businesses that already have limited resources with more needless red tape. This tax can also put small businesses in Illinois at a competitive disadvantage compared to businesses in neighboring states due to higher operating costs, which in turn, can make it harder for small businesses to attract investment or retain talent.
At the time the franchise tax was enacted in 1872 in Illinois, corporations did not pay a corporate income tax. The franchise tax was a way for corporations and their shareholders to pay for the relatively new legal protections and legal standings granted them by the state, and paid-in capital was one of the few possible bases for the tax. Today, in contrast to 1872, corporations are subject to a wide variety of Illinois taxes. The Illinois corporate tax burden includes (but is not limited to) the corporate income tax, property taxes, and utility taxes.
Illinois House Republicans have fought for the elimination of the franchise tax for many years, and it was on schedule to be eliminated by 2024, until the Democrats and Gov. Pritzker broke the promise made in 2019 and took steps to re-establish the tax. House Republicans will continue to introduce legislation and fight to get this tax eliminated.
“House Republicans have introduced reasonable reforms to help make Illinois a pro-growth state where businesses and families can grow,” stated Rep. Dan Ugaste. “Small businesses face many challenges in our state, and when our tax burden is one of the highest in the nation, accompanied by unnecessary regulation, we put our businesses and our state at a great disadvantage. This tax extends an especially high burden on small businesses.”
“The tax burden on our small businesses is substantial,” added Rep. Jennifer Sanalitro. “It prevents us from both creating an environment that attracts new investment while also preventing us from lowering costs for our state’s existing businesses.”