FairEconomy.org - The Estate Tax and Family Farms

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The Estate Tax and Family Farms

To protect family farms, it is better to reform — rather than repeal — the estate tax.
It is vitally important to protect America's family farms. But this concern — the rationale usually advanced for eliminating the estate tax — can best be addressed by reforming the estate tax, rather than repealing it.

The current estate tax rules are too complex and should be simplified.
Because of its complexity, the estate tax actually falls harder on a mid-size farm that has not done estate planning than on some big estates that have used the best legal advice. This problem can be best solved by simplifying the estate tax rules.

Repealing the estate tax will actually hurt small family farms.
Estate taxes help preserve family farms by leveling the playing field and helping them compete against mega-scale agriculture. Repeal of the estate tax will only encourage further concentration of farm ownership.
“An effective estate tax helps modest family farms survive the growing pressures from big agribusiness. Estate taxes help level the playing field between typical family farmers, who must compete for land based on what they can earn from it, and wealthy heirs of large farms who compete mainly on the basis of their inheritance.”
– Chuck Hassebrook
Center for Rural Affairs
Walthill, Nebraska

Pro-repeal forces have rejected sensible reforms.
In 2000, 2001 and again in 2002, the Senate rejected reform proposals that would have tripled the family business exemption to $4 million for individuals and $8 million for couples. That reform would have shielded more than 99% of all farm assets from estate taxation. Unfortunately, few farmers knew about these reform options. By taking an all-or-nothing attitude, and refusing to compromise on reforms, pro-repeal forces have shown that they don’t really care about family farms. In fact, 49 of the 51 Senators who voted to repeal the estate tax in 2000 also voted for the 1996 “Freedom to Farm” act, which has led to greater corporate control of agriculture.

The effect of the estate tax on farms has been exaggerated.
According to the IRS, of the 2.3 million people who died in 1998, only 642 left farm assets equal to at least half the total estate. In 2001, the New York Times reported that the pro-repeal American Farm Bureau Foundation could not cite a single case of a family farm lost due to the estate tax.

Many of the wealthiest "farmers" aren’t really farmers at all.
A significant number of the “farmers” who would benefit from estate tax repeal are actually city-dwellers who own a ranch or horse farm as a vacation getaway.

The special estate tax rules that apply to family farms ought to be simplified.
To limit estate tax liability, farmers can currently value farmland at between 45% and 75% of its fair market price. Farmers can also pay back estate taxes over 14 years. Simplifying these rules would provide relief for modest estates and reduce the need for planning and legal manuever-ing, while making sure that the wealthiest estates still pay their fair share.

The National Farmers Union supports reform.
The National Farmers Union, representing 300,000 farm and ranch families throughout the United States, supports estate tax reform that immediately increases the tax exemption to at least $4 million per individual ($8 million per couple), reduces rates, simplifies the exemption qualification rules, provides a future indexing mechanism and increases the annual gift allowance to at least $25,000.

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