Under current law, farmers who leave $4 million per-couple in nominal farm assets to their heirs do not have to pay any estate taxes. Because of provisions that let them value their farms at less than full market value, some farmers can leave farms whose full value is almost $6 million to their heirs without paying estate taxes. Despite the rhetoric of estate tax opponents, there is no evidence that any farmers nationwide have to sell their land to pay estate taxes.
Yet, estate tax opponents in the House and Senate have proposed an unlimited estate tax exemption for farmers. In other words, farms would be treated differently from all other assets, and farmers could leave to their heirs even the largest landed estates without paying estate taxes.
If farmers are already well protected under current law, what motivates the estate tax opponents behind this proposal?
The answer is: it's not about the farmers. This proposal offers a loophole for billionaires in other lines of work to leave great wealth to their heirs, without paying estate taxes, by buying up farmland. The foreseeable consequence will be higher farm land prices and, paradoxically, greater challenges for young farmers who want to take up their parents' and grandparents' honorable work on the land.
Read the report from the Center on Budget and Policy Priorities for the full story.
The greed of the greedy knows no bounds.
ReplyDeleteAnd it's amazing how our Congressman will do ANYTHING for a big donor. Simply ANYTHING.
My husband is from a farming state (Neb), and the situation is more complex than you think. In order to survive and stay in farming, these families own huge farms with large amounts of equipment. Easily a million dollars a year in liquid assets and crops can pass through their hands, mostly going elsewhere, leaving them with a perilously thin "profit margin" to live on. The "family farm" of a few hundred acres and the quaint little red barn died after the Depression, or survived because somebody took a day job (Come to the South, go out to a rural area, and look at the abandoned barns falling down). My family farm now has million-dollar houses on it. If property and estate taxes had been reasonable, maybe... But "economies of scale" became necessary, like it or not. These men aren't greedy- they just want to find some way to survive in your "tax the rich" world.
ReplyDeleteWe have a fairly modest family farm in WA state. It has a total of about 275 acres of land. About half of that is scrub land used for grazing cattle. The other half is fields that grow hay.
ReplyDeleteMy mother recently passed away and the tax assessor just send the new property assessments. 'New Market Value' on the land alone is about 2.8 Million. This amount even though 160 acres is in a land trust (read conservatin easement) and can't be developed. Half the land is rented out for cattle grazing at about $1,000 per year. The other half brings in modest income from hay and some beef cattle.
The heirs would like to keep the farm in the family but may have to sell at least part of the land to pay the estate taxes. I strongly disagree with the view expressed in some articles that if the family farm had enough liquid assets to pay the estate taxes it 'didn't hurt the farm'. We may or may not have enough. With the land value and other assets we are certainly over the 2 million mark.
Current laws don't just hurt big greedy corporations and 'Bill Gates type folks. They hurt modest farms that have been in the family for almost 100 years. Maybe the correct answer isn't 'unlimited' deduction for farms but the current limits are not so good either. Maybe something in the middle would be good. Anyway, don't you believe it when you read statements about how it is only the very rich and greedy who would benefit from change in the current laws. Our farm is a good example of the term 'land poor'. The recent housing boom has made the 'market price' on all land go up. Much of our land went up 2.5 times the value from the last assessment 4 years ago.
Exactly the reference I needed. I'm a suburban Dallas newspaper editor, and Sen. Kay Bailey Hutchison just got down speaking to a joint southside chamber of commerce meeting.
ReplyDeleteI am a liberal democrat and even I don't like the estate tax system and structure as it is. The recent unrealistic real estate boom artificially overinflated the values of many homes and land. I will give you a perfect example, my parents own a home that was purchased for around $380,000 5 years ago. The property with no improvements or differences (thanks to the fake real estate boom fueled by the federal reserve, greedy lenders and investors, the county tax assessors, and property appraisers on the grift with lenders as well as the developers with cookie cutter small lot size homes paying off planning department officials), nearly doubled the value of that house and the homes of many others. Real estate assessments at death are based on this a so called fair market value, but who determines this "market value"?....it's those I mentioned before that profit the most form overinflating it. With the 2 million exemption that is on the books now and in just a few years dropping back down to 1 million, you will hit that quickly and be left with a large tax bill no matter what you do within the current guidelines. The exemption needs to be lifted to a much higher level such as 5 million per person in value. Fair market value is so subjective to financial objectives of a few individuals in the investment game, that it is hardly anything even remotely fair. The estate tax is affecting more and more middle income families who want to stay there and gradually move up. Let's face it, most millionaires were poor to start with and worked, saved and invested their way to the top, not all but most. In this great nation of ours, a smart working family, can go from lower class to upper class in less than 50 years. We shouldn't be punished for that. Billionaires and multimillionaires with estates well above 10 million in value generally were born with money. My family came here with less than a $1000 dollars and in 25 years have become what most Americans would consider upper middle income. We have debt just like everyone else, but the goal of paying it off and owning property outright tends to have little meaning if the values of our future estates are unrealistic and subject to overtaxation. Real estate valuation is not cash, yet you are forced to sell a home you would rather live in or the rental you could make a your extra income with, because the rental hit over the exemption value thanks to this fair market valuation done on behalf of the IRS. I own real estate myself and am cash poor because if I need cash, I have to sell something or get into more debt with an equity loan. Remember: Enron was overcooking the books in value, and they got bit in the butt, now the mortgage investment and lending institutions are facing the same fate....and they very well deserve it. Hard working and smart saving American families should not get hurt by the estate tax. It definitely needs to be overhauled and adjusted.
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