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August 2010

Let’s Put Death Taxes to Rest


Bob Stallman
President
American Farm Bureau
By Bob Stallman
President, American Farm Bureau

According to Benjamin Franklin, death and taxes are life’s only certainties, but for farmers and ranchers, death taxes, also known as estate taxes, are far from a sure thing. For decades, Farm Bureau has been at the forefront in seeking estate tax reform. In 1996, it was Farm Bureau members who brought the issue to Congress’ attention by delivering 100,000 messages to lawmakers. Now, 14 years later, we have an opportunity to seek long-lasting reform.

Earlier this year, AFBF launched the “Put Death Taxes to Rest” grassroots campaign. If we garner the 60 votes needed, we are optimistic the Senate will address this issue. But, to be successful, we need every Farm Bureau member engaged in the effort. Working together on this campaign will help us bring certainty to farm owners to better transfer farm operations from one generation to the next and ease the transition following the death of a family member.

Nickel and Dimed to Death

Estate taxes can hit farm families harder than other small business owners because 84 percent of our assets are real estate-based. When Uncle Sam comes to pay his respects, surviving family members without enough cash on hand may be forced to sell land, buildings or equipment they need to keep their operations going.

In these circumstances, farm families’ heartache is felt well beyond the gates of our operations, as the rural communities and the businesses we support also suffer when farms and ranches downsize or disappear. And farmland close to urban centers is often lost forever to development when estate taxes force farm families to sell off land to pay the taxes.

In essence, estate tax relief is not only about a cattle operation in Texas, it’s also about the family in New York City sitting down to a steak dinner.

Death Taxes = Double Taxation

Although 2010 is an estate tax-free year, under a tax law passed in 2001, the tax returns on Jan. 1, 2011, with a top rate of 55 percent and a $1 million exemption. With such a low exemption, as many as 10 percent of farms and ranches whose owners pass away could owe estate taxes next year, according to the Agriculture Department.

A higher exemption and lower rates will give farmers and ranchers a better chance to remain in operation when transferring from one generation to the next. This is why we are calling on Congress to provide a permanent estate tax provision that would increase the exemption level to $5 million, and adjust it for inflation, and reduce the maximum rate to 35 percent.

Estate tax reform must also include stepped-up basis, which limits the amount of property value appreciation that is subject to capital gains taxes if the assets are sold. Because farmland typically is held by one owner for several decades, setting the basis on the value of the farm on the date of the owner’s death under stepped-up basis is an important tax provision for surviving family partners.

As farmers and ranchers we 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. So, contact your senators today and let them know it’s time to put death taxes to rest.