The House voted 240 to 179 Thursday for full repeal of the estate tax, commonly referred to the death tax in agricultural circles because of the double tax required from families when an owner of an operation dies.
At the end of 2012, Congress passed the American Taxpayer Relief Act, narrowly avoiding a return to a $1 million estate tax exemption with a 55% tax rate. This legislation provided a permanent exemption of the estate tax of $5 million per individual, $10 million per couple, and raised the top tax rate to 40%. While ATRA provided some relief for some farmers and ranchers, fixing the underlying problem is critical. With rising farm land values across America the estate tax will continue to plague farm and ranch families until it is repealed, the National Cattlemen’s Beef Assn. said in a statement.
The U.S. Department of Agriculture names the death tax as one of the top contributors to the breakup of multigenerational farming and ranching operations.
NCBA president Philip Ellis noted, “The estate tax is a disservice to agriculture because we are a land-based, capital-intensive industry short of funds, and with few options for paying estate taxes when they come due,” said Ellis. “Unfortunately, all too often at the time of death, farming and ranching families are forced to sell off land, farm equipment, parts of the operation or take out loans to pay off tax liabilities and attorney’s fees.”
Bob Stallman, president of the American Farm Bureau Federation, said farmers’ and ranchers’ assets are tied up in the land, not sitting in a bank. He said previous exemptions have provided relief, but estate taxes still weigh on many farm families.
“Some must slow growth to remain exempt. We need tax policies that help capital-intensive businesses like farms and ranches, and that don’t stand in the way of sons and daughters ready to follow the agricultural legacy of their parents.” Stallman said.
House Agriculture Committee chairman said in his experience as a certified public accountant he’s seen the death tax hurt individuals who have worked hard and saved all of their lives in order to build up a nest egg for themselves and their families.
“When a farmer or rancher passes away, even though he has already paid taxes on everything he owns, the sons and daughters who want to carry on the family tradition will first have to get over the hurdle of a whopping tax penalty that can reach as high as 60%. Why would we do that to young people wanting to stay on the farm or ranch,” Conaway questioned.