Farm, land groups seek to head off return of full ‘death’ tax
On the same day that President Barack Obama met with Republican and Democratic congressional leaders to talk about the Bush era tax cuts that expire at the end of this year, ten major agricultural organizations made their case during a press conference Tuesday for fixing what could be an estate tax nightmare for many farm families in 2011. After dropping to zero this year, estate taxes jump back up to their pre-2001 level of 55% for all estates over $1 million starting January 1st. That’s unless the overloaded lame-duck Congress finds time to change the rules before members adjourn later this month.
Public Lands Council (PLC) Executive Director Dustin Van Liew told reporters that USDA has found that the estate tax, commonly known as the death tax, “is one of the leading causes of the breakup of multigenerational family farms and ranches, and it’s an issue that the 111th Congress needs to address before wrapping up this month. If Congress does nothing, in less than one month, farmers and ranchers, land owners and small business owners across the nation will be dealt a blow that many won’t survive.”
Estate tax legislation enacted in 2001 increased the exclusion amount from $675,000 to $3.5 million and reduced the tax rate on estates exceeding the exclusion from 55% to 45% before dropping to zero for 2010. Without congressional action, the estate tax reverts to a $1 million exemption, with a 55% tax on estates worth up to $10 million, and 60% on larger estates.
While seeking the abolition of the estate tax, the groups at Tuesday’s press conference said a fallback is a legislative proposal from Sens. Blanche Lincoln (D-AR) and Jon Kyl (R-AZ), and Reps. Shelley Berkley (D-NV) and Kevin Brady (R-TX) that would increase the exemption level to $5 million. The measure would also decrease the tax rate to no more than 35% on the remainder of the estate, index any exemptions to inflation; and include a stepped-up basis. With more than 10% of farm estates threatened with owing estate taxes, Van Liew said that “preserving the legacy of American agriculture should be a common goal [because] taxing family farmers and ranchers out of business will have serious impacts on local economies, on rural communities and in reality, on all Americans.”
National Cattlemen’s Beef Association (NCBA) member Scott Bennett, a Virginia Tech University junior active in his family’s cattle operation, said, “One would think that commonsense would prevail and this death tax would be reformed in such a way that it allows young people, the next generation, to take over family farms and ranches, which are responsible for providing a safe, abundant and affordable food supply here and across our borders.” But, Bennett said, “here we are only a month away from a death sentence to family farmers and ranchers without any clue about what type of resolve, if any, will move through Congress . . . With a $1 million exemption and a 55 percent tax, we would need to sell most of our assets just to keep part of the operation in the family. This is a death sentence to family farms, ranches and small businesses.”
American Farm Bureau Federation President Bob Stallman said that his organization will “continue to stand by our goal of eliminating death taxes, which amount to little more than double taxation, since the income is taxed first when it’s earned and again when it is transferred to heirs.” Other groups represented at the Tuesday press conference were the American Soybean Association, the National Association of Wheat Growers, the National Corn Growers Association, the National Cotton Council, the National Farmers Union, the National Milk Producers Federation and the National Pork Producers Council.
As part of their concerted estate taxes effort, the ten organizations joined in a letter to President Obama from 31 agriculture groups asking him to support the $5 million, 35% estate tax solution. NCBA President Steve Foglesong said the fix is essential because, “For far too long, farmers and ranchers have faced uncertainty when it comes to planning ahead for the future of their estates. The President needs to force action on this or be held responsible for the ruin of many family operations and officially preventing young people from returning to the family farm.” Foglesong said the estate tax “is not a tax on the ‘wealthy elite.’ The wealthy can afford accountants and estate planners to help them evade the tax. This is a death warrant for small-tomedium sized family businesses. Farmers and ranchers are often forced to sell land, equipment, or the even the entire ranch just to pay tax liabilities. This is money that could otherwise be reinvested to grow the family business and hand it down to future generations.” Colin Woodall, the NCBA vice president of government affairs, issued a call to action. “Our success in stopping [the return of the full estate tax] depends on a strong grassroots effort from NCBA members, all cattle producers, farmers and landowners and small business owners across the country.”