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Farm groups back $5 million estate tax exemption

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.

But Johnson’s group has also backed the Kyl-Lincoln estate tax
approach.

“It’s hard to make long term plans when you have no idea
what the long term policy will be,” Johnson said.

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