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Farm groups back $5 million estate tax exemption

DANIEL LOOKER 11/30/2010 @ 2:39pm Business Editor

At least 10 groups agreed on one part of the looming tax battle in Congress next month. On a day when President Barack Obama and Republican and Democratic congressional leaders met to talk about the Bush era tax cuts that expire next month, ten farm organizations called for extending estate tax relief.

There was no obvious agreement coming out of the White House Tuesday, but the farm groups are getting behind legislation introduced by Senators Jon Kyl (R-AZ) and Blanche Lincoln (D-AR) that would set the unified tax credit at $5 million per spouse, with a 35% rate on the taxable amount of an estate.

If Congress doesn’t reach an agreement on the estate tax, the exemption (technically, the unified tax credit), falls to $1 million per spouse next year, with the rest of the estate taxed at 55%.

Most farm groups agree that would be disastrous for many multi-generation farms.

At a press conference Tuesday, Taylor Slade, a Williamstown, North Carolina, farmer who spoke for the National Cotton Council, said that with land prices in his area running at about $3,000 an acre, even small farms of less than 350 acres would be affected by the lower exemption that was in place before the tax cuts of 2001 were passed under the administration of George W. Bush.

“Today, a 350-acre farm would not be competitive and it would not be there after the tax man has visited,” said Slade, whose own family has farmed near Williamstown since 1722.

Most of the groups that shared a podium at the National Press Club in Washington, DC, Tuesday favor outright repeal of the estate tax, but that’s considered virtually impossible. Democratic leaders who will still run Congress during the lame duck session that ends in December actually favor a lower $3.5 million exemption and a higher 45% tax rate.

But the specter of inaction brought together groups such as the American Farm Bureau Federation, which backs repeal and the National Farmers Union, which does not.

Farm Bureau President Bob Stallman said that many farm families could not afford to stay in farming if the current estate-tax-free year is followed by inaction that allows the pre-2001 exemption of $1 million to take effect in 2011.

“With such a low exemption, as many as 13% of farms and ranches whose owners pass away could owe estate taxes next year,” Stallman said, citing USDA estimates.

Farmers Union is one of the few ag groups that supports some level of continued taxation on large estates. Its current policy favors a $4 million exemption and a 45% rate.

“We all come from lots of different perspectives,” said Farmers Union president Roger Johnson, who pointed out that estate taxes have existed since ancient Egypt started using them in the 7th century BC. And they were favored by the father of modern economics, Adam Smith, who thought it was unfair for large landed estates in Britain to escape taxation.

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Best Compromise 12/01/2010 @ 8:50pm The deficit will impel action to find money. An estate tax is a probable target. $5 million is probably an appropriate target level, but I'd like to see it indexed.

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Seems like reasonable levels 12/01/2010 @ 1:39pm $10 million per married couple seems like a reasonable figure to pass free of estate taxes. Maybe a progressive amount after that to break up the very large billion dollar estates might make sense, though. Start out with a 25% rate and move up to a higher rate as the estate increases. I don't think that having private individuals with $5 to $10 million of inherited wealth is going to bring America down, and this figure should have some sort of inflation index.

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