Legislation has been introduced in both the House and Senate that would permanently repeal the estate tax. Sen. John Thune’s (R-S.D.) bill, The Death Tax Repeal Act of 2013, coupled with bipartisan legislation of the same title introduced by Reps. Kevin Brady (R-Texas) and Mike McIntyre (D-N.C.), is welcomed by American agricultural organizations.
While significant tax relief was enacted last year to help farmers cope with estate taxes, many in agriculture are pushing for permanent repeal. The legislation introduced would repeal the estate tax, maintain stepped-up basis and make permanent a 35% maximum gift tax rate and $5 million lifetime gift tax exemption indexed for inflation.
“Individuals, family partnerships and family corporations own 98% of our nation’s 2 million farms and ranches,” said Bob Stallman, American Farm Bureau Federation president. “When estate taxes on an agricultural business exceed cash and other liquid assets, surviving family partners may be forced to sell land, buildings or equipment needed to keep their businesses running. This not only can cripple a farm or ranch operation, but also hurts the rural communities and businesses that agriculture supports.”
The value of family-owned farms and ranches is usually tied to illiquid assets, such as land, buildings and equipment, said AFBF. With 85% of farm and ranch assets illiquid, producers have few options when it comes to generating cash to pay the estate tax. Recent increases in agriculture cropland values, on average 15% from 2011 to 2012, have greatly expanded the number of farms and ranches that now top the estate tax exemption.
Many farm families are asset-rich and cash-poor, with most of the value of their estate attributed to the value of the land they use to grow food and fiber for consumers around the world. According to the U.S. Department of Agriculture, the average price per acre of farmland in Illinois is $6,700, a 17.5% increase from 2011-2012. Increased demand for farmland has driven up the value per acre in many states, causing many farmers to be caught up in the costly estate tax web.
“The death tax continues to harm rural America’s legacy of family farming and ranching,” said Steve Foglesong, past president of the National Cattlemen’s Beef Association. “Congress and the American people need to know that businesses and jobs are suffering from the death tax and it must be repealed.”