|For the week of November 19, 2012|
My Neighbor is Not Warren Buffett
In 1975, my senior year in high school, there were five families farming along Route O, a two-lane blacktop that snakes along the section lines for the 10 miles between Tarkio and Westboro, two tiny towns in northwest Missouri. Four of these families are still involved in farming, and three of them have extended family farms, with several generations working in the family business. Each of those families is now headed by a farmer or a retired farmer who has a problem, a problem that is going to get much worse come Jan. 1.
That’s when the present law concerning estate taxes expires. The exemption for exposure to the “death tax” will revert to a $1 million level and the maximum tax rate will increase to a confiscatory 55 percent. This is hardly a tax targeted at the filthy rich, but rather an unfair levy on almost everybody who has made a lifelong career on the farm.
None of the families on my former bus route are rich. No assets compare to the Buffett fortune, or Bill Gates, or even one of those hedge fund managers who preside over Wall Street. These are people who’ve lived simply, saved their money and at this stage in their life have only one goal: to pass their life’s work to their children. In the case of the three families who have descendants actively involved in farming, they want to protect their children’s ability to live a life like they’ve lived. This rather modest goal is threatened by Congress’s failure to act on permanent estate tax reform.
Critics of estate tax reform like to point out that very few estates actually pay estate taxes, while arguing at the same time that the federal budget can’t stand the loss of a single dollar of estate tax revenue. They’re wrong on both counts. Estate taxes raise almost no revenue, generating only $16.9 billion in the last year for which receipts are available. That’s a rounding error in a budget the size of the U.S. government, and a doubling of estate tax revenues would only finance our budget deficit for about a week. As for the estates that owe estate taxes, those estimates don’t take into account the changes in the value of farmland in the past few years. According to local plat maps, my neighbors own from 300 to 1,000 acres. That acreage is small in today’s world and comparable to the average farm size in Missouri.
Farm ground in this area has been selling for $7,000 to $10,000 per acre. My neighbors are multi-millionaires, much to their surprise. If these farmers are able to accomplish their goals, none of these millions will ever be spent. Instead, these farms will stay in families for generations. But the person who owns 1,000 acres will be faced with a prospective tax bill of around $5 million. This is in addition to the thousands of dollars in legal and accounting fees these farmers have already spent to ensure their farm is protected and passes to the next generation. No farm in Missouri, or anywhere else, has the wherewithal to stand that kind of financial tsunami. The death tax is poised to end the kind of family farming that is so important to our nation, and we need relief.
Farmland prices are high because farm incomes have been good. That’s a wonderful thing for which farmers owe no apology. Every dollar of those increased incomes is taxed by the state and the nation and every acre of those farms pays property taxes. We’re already paying taxes on our good fortune, as we should. We ought not be taxed again at death.
Blake Hurst is president of Missouri Farm Bureau.