Ag chair argues for estate tax relief extension
Farmers face an added hazard next season -- potentially devastating estate tax exposure.
Published: Aug 12, 2012
Farmers who’ve coped with drought, poor yields, and financial uncertainty this summer face an added hazard next season -- potentially devastating estate tax exposure.
A current $5 million individual/$10 million-per-couple estate tax exemption expires Dec. 31, along with a 35 percent “death tax” rate. If Congress fails to act, the estate tax will default to a $1 million exemption and a 55 percent rate.
High crop prices have enabled many growers to accumulate capital assets the last few years, but they or their heirs “might have to pay that back in estate taxes,” Knox County farmer David Serven warned House Ag Committee Chairman Frank Lucas (D-Okla.) last week in Normal.
Serven cited his 70-year-old father’s lifelong contribution to the family farm, “building up equity over the years and paying taxes all along.” Lucas urged tax relief for farmers “who’ve done without, who’ve reprioritized their lives in order to make payments on (and) accumulate that most important asset.”
“If you’re a farmer or rancher, your most important asset aside from your loving wife, healthy children, and wonderful parents is your farm, your ranch,” the ag chairman stressed at a McLean County Chamber of Commerce lunch. “It’s your livelihood. It’s how you create your existence.
“(Lawmakers) may disagree over where (tax) rates should be, but I’d hope everyone in this room would agree we don’t want to go back to 2000 tax rates. Suck that much money out of the economy right now, when it’s anemic at best?”
Lucas noted a number of his colleagues “have a different point of view.” House Republicans are unlikely to accept “picking winners and losers” via tax policy revision, while the White House and Senate leaders are unlikely to “accept anything less than picking winners and losers,” he said.
House Ways and Means Committee member Aaron Schock, a Peoria Republican, argued against President Obama’s “middle-class tax relief” plan limited to households with less than $250,000 in annual income. While Illinois land prices alone expose farmers to a $1 million exemption, Obama’s threshold would exclude many farm families from needed relief, he said.
Farmers with earnings above $250,000 must invest heavily in “big green machines” and crop storage facilities, Schock maintained. “These are small family businesses trying to stay above water,” he told FarmWeek.
The Job Protection and Recession Prevention Act, which cleared the House prior to its August break, would maintain existing income tax rates, the $1,000 child tax credit, “marriage penalty” relief, and a top 15 percent tax rate on dividends and capital gains. It would extend a 35 percent death tax rate and a $5 million exemption.
The Senate Finance Committee has recommended extension of enhanced small business expensing, the $1-per-gallon biodiesel blenders credit, a credit for donations of conservation easements, and a 10-cent-per gallon credit for small “agri-biodiesel” producers. The committee’s plan does not deal with the estate tax.
Given pre-election politics, Lucas sees the possibility of the next Congress having to extend expiring tax relief measures “retroactive to midnight, Jan. 1, 2013.”
“I’m sorry about the uncertainty that causes you as you make your planting decisions for next year,” he told farmers and businessmen. “That’s the trap we’re in.”
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