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See the latest reader comments and hear John explain some of agriculture’s complex topics.
Death Tax Debate
May 05, 2009
Editor's Note: John's mailbag segment focusing on the "death tax" created quite a bit of viewer feedback...below are his comments in full, followed by viewer reaction:
*Farm Report Mailbag from May 2-3, 2009:
TIME NOW FOR OUR WEEKLY LOOK INSIDE THE FARM REPORT MAIL BAG...
THIS WEEK I THOUGHT I WOULD ADDRESS A PERSISTENT TOPIC. THIS ONE IS FROM GARY WALKER IN PUEBLO, COLORADO.
"CONGRESS IS PONDERING WHAT TO DO WITH THE AGRICULTURAL DEATH TAX. THE LOOMING CRISIS IS HOW TO KEEP THE FAMILY FARM OR RANCH."
GARY, MANY FARMERS AND RANCHERS HAVE BEEN CONVINCED THIS TAX THREATENS THEM. BUT AFTER ADMINSTERING THREE FARM ESTATES, I THINK WE'RE BEING USED.
FIRST, THERE IS NO AGRICULTURAL DEATH TAX. AFTER ALL, IF THERE WAS A DEATH TAX EVERYONE WOULD PAY IT. INSTEAD ONLY - ABOUT A QUARTER OF A PERCENT EVEN FILE AN ESTATE TAX RETURN. EVEN FEWER PAY ANY TAX.
RIGHT NOW IT LOOKS LIKE THE ESTATE TAX COULD STAY AT 2009 LEVELS.
UNDER THESE RULES, THE NONPARTISAN CENTER FOR TAX POLICY ESTIMATES ONLY ABOUT 100 SMALL BUSINESSES AND FARMS WOULD OWE ANY TAX IN 2009. BLUNTLY PUT, THE IDEA FAMILY FARMS ARE BEING DEVASTED BY ONEROUS DEATH TAXES IS A MYTH.
John - Your comments seem to imply that keeping the 2009 death tax rates is acceptable. You are a farmer that is thinking wrong. A tax with a pulse will keep living. Have you forgotten that President Reagan lowered taxes from 70 percent to 28 percent? Have you forgotten that President Bush 43 lowered death taxes more? The death/gift tax is unfair and wrong. Stand up and get it abolished.
You may want to address the concentration of entities getting too large and hurting small business people, but don't fix it with death and gift taxes. Take a look at what happens to wealth in the third generation of a family. It is spent back into the economy.
Don't let us get back to 70 percent income tax when trying to pay for farms and 70 percent death tax when the next generation wants to farm.
Back to the top, you should be a compassionate conservative!
I am totally against this proposed estate tax. Just another means the government wants to use to take money from the people that are the pillars of this society. Our government is totally out of control with more strangling taxes. I am not impressed with the road our government is taking at present. Just look at our inept government's way of handling info on the H1N1 virus with repeated request to not use swine flu as it's name. The CDC first said no, they would not change the name. They have to wait for a week or two before they do anything about changing that stance. That of course is after the swine industry in America takes a major financial downfall. Well, here we go again hurting the american farmer. I am not surprised if they could care less about the welfare of our farming community, I am sure they are more interested in loosing taxes from these businesses instead of the welfare of the families. The powers that be in our congress and senate are crippling our country and I am just wondering when the real americans are going to wake up and do something about it. It is evident there are too many greedy people throughout our nation Just like a statement from Abe Lincoln that he took from the bible " A house divided can not stand." It seems like legislation in our government is designed around each legislator's agenda of power and how will this benefit me mentality Sad to see this getting worse every year in our government's leaders.
The host is an idiot when it comes to estate taxes. He said there is no such thing as a farm death tax, and after administering three estates himself, he knows that the death tax doesn't affect very many farms or ranches, and therefore is not a problem.
Although I live in PA now, our ranch, the ranch I grew up on, is in the Hill Country of South-Central Texas, about 45 miles northwest of San Antonio. My dad never made more than possibly $12,000 or $14,000 a year off that place. But because that area has become a very popular retirement and recreational area, the farms and ranches are worth a ton.
At current levels, the estate tax exemption is $3.5 million. Our last 1,000 acres sold for almost $5.5 million. That has not passed to us...the children...yet.
What that means for anyone trying to keep the place in the family, let's say a place our neighbor's size, which is 7,500 acres, is a taxable estate of over $41 million dollars. Your host is going to tell me that isn't a problem???
I don't know where his experience handling a whole, whopping 3 estates took place, but it wasn't anywhere I'm familiar with.
In addition, although the estate tax exemption is unlimited in 2010, by 2011 it reverts to $1 million. So my neighbor's parents would have to pass away in 2010, or else they're screwed! And that's not taking into consideration any changes Congress may make to the estate tax laws.
In the Hill Country of Texas, 7,500 acres will be hard pressed to run 200 animal units. It's canyons, rocks, and cedar, mostly, with some really pretty country interspersed. But it's not good ranching country. You can make a living, barely.
Assuming they run 200 mother cows, at current feeder calf prices, and average costs, with 80% production every year, you'd sell 160 calves (if you didn't keep any) for about $400 a head, after feed and upkeep. $64,000 gross, before taxes.
Running 200 head of cattle is a lot of hard work, by yourself. And you're not going to make anywheres near enough to pay the estate taxes on $41 million in value! Even assuming a deduction for the parents' basis, the estate is going to be multiple tens of millions. My dad's basis was less than $100 an acre, on land that sold for $5,500 per acre!
By the way, I have friends and relatives who have written some big checks to the IRS, and who only had the money to do so because they sold the place. Couldn't keep it if they wanted to. So tell your host he's way off the mark. Estate taxes are a problem, when you're trying to hold on to the place. And they're unfair when you sell it, too.
I caught the very last part of your broadcast this morning, May 2, when you commented on the estate (or so-called "death" tax). I appreciated your comments and agree completely. The "death" tax is a myth as you pointed out and the estate tax is probably useful and productive at least in my understanding. Thanks for brave and honest reporting.
South English, IA
I love your end of the show political comments. Once again you are right on with your comment about the "death taxes". I get the sense that you are neither Democrat or Republican but just plain Common Sense. And you are not afraid to say what makes sense even though it might inflame your BASE.
Even the two richest men in the world want to keep estate taxes in place.
I'm so sick of the attitude that we should get all the government payments and goodies but we don't want to pay any taxes.