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Estate Tax Report Released

AFBF says report shows the harm of estate taxes on family businesses and farms.

Published on: Jul 26, 2012

The American Farm Bureau Federation said it concurs with a Joint Economic Committee report, "Costs and Consequences of the Federal Estate Tax," released Wednesday that details the financial harm posed by estate taxes on family businesses.

According to the report, there are extensive costs associated with the estate tax in terms of the dissolution of family businesses, slower growth of capital stock and a loss of output and income over time. This can be particularly hard on farm families, who own 98% of the nation's 2.2 million farms.

AFBF says report shows the harm of estate taxes on family businesses and farms.
AFBF says report shows the harm of estate taxes on family businesses and farms.

"With the average age of a farmer being 58 years old, the estate tax creates even a steeper barrier for young farmers and ranchers to take up the profession at a time when farming is already difficult to enter," said AFBF President Bob Stallman. 

The report also found that the estate tax impedes economic growth because it discourages savings and capital accumulation. Gaining access to capital is vital to farms and rural economies.  In 2010, land accounted for approximately 85% of total farm assets. Currently, in some parts of the country, land values have increased well over $10,000 per acre. Further, land values from 2010 to 2011 increased on average 25% and have greatly expanded the number of farms and ranches that now top the estate tax $5 million exemption.

Especially holding true for farmers and ranchers, the report also found that the estate tax is a significant hindrance to entrepreneurial activity since many family businesses lack sufficient liquid assets to pay estate tax liabilities. In 2010, liquid assets in agriculture comprised only 12% of total assets whereas hard assets (including land and buildings) comprised 88% of total assets. Alone, real estate accounted for approximately 85% of farm assets in 2010.

"When estate taxes on an agricultural business exceed cash and other liquid assets, surviving family partners are forced to sell illiquid assets, such as land, buildings or equipment to keep their businesses operating," said Stallman. "With 88% of farm and ranch assets illiquid, producers have few options when it comes to generating cash to pay the estate tax."

AFBF supports permanent elimination of the estate tax. Until this can be accomplished, Farm Bureau supports extending the current $5 million exemption. Without congressional action, in 2013, the estate tax exemption will shrink to $1 million per person with no spousal transfer, and the top rate will increase to 55%, striking a blow to farmers and ranchers trying to transition from one generation to the next.

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  1. Anonymous says:

    You are wrong, anonymous. Four generations have worked on our family farm. My father is 85 and can no longer work but wants to pass it on to his children. I spend almost all my weekend and holiday hours from my full time job working on the farm. My son and his wife have moved in and also spend all their available time working. 55% of the value of the farm would wipe it out, as we do not have the available cash. But even if the next generations had not worked on the farm, who are you to have an opinion on what my hard working father wishes to do with the land his father left him?

  2. Anonymous says:

    The land was bought with AFTER TAX INCOME--tax had already been paid on the money used to buy the land. To tax the estate is to tax the income used top buy the land TWICE.

  3. Anonymous says:

    I certainly do not agree with the Farm Bureau on this issue. A couple of points need to be considered. First of all, in the great majority of the situation, the farm assets are not being passed on to farm operators. There is probably more that one child in the family where the assets are going. In many cases the children have done very little to help acquire these assets therefore there needs to be some taxes collected on these assets. Secondly, why should the child who receives the assets of the estate be given a very favorable tax treatment when the parents were the ones who built up the estate. He should not be able to simply take over the assets-he did not earn them. Thirdly, the point is made that the estate does not have enough liquidity to pay the taxes. This is all happened because the owner made up his mind that he did not want to pay any taxes while he was acquiring the assets. In recent years the tax codes for capital expenditures and depreciation of assets has been very favorable to the business owner. The Federal Government helped the farmer build up is assets.When he passes away, his estate needs to pay estate taxes to "payback" the Federal Government for the help they were given by the tax codes. Also, please keep in mind that estates are getting much larger due to the "appreciation" of the assets. The farmer was able to by land years ago that was much cheaper. The person who is taking over the estate did nothing to enhance the estate.