Approaching the Death Tax Cliff
Dec 05, 2012
The Farm Journal/Pioneer Legacy progam was in Amarillo this week. It was my first chance to sit through one of the sessions, and the first such session since the election.
I walked away with two distinct impressions.
First, our Washington leadership MUST do something about estate taxes. What we have now is bad enough. Returning to the pre-Bush plan would decimate American agriculture. We’ll go from 34% of everything over $5 million to 55% of everything over $1 million.
That’s drastic stuff. Say you have a $6 million estate—which isn’t exactly a big operation with today’s inflated land prices. I figure at current prices in my neighborhood, it would buy you enough land to run maybe 300 to 400 cows. It would be fewer if you’re somewhere close to scenery or cities.
If you die on Dec. 31, your kids’ bill is $350,000. Go the next day, it’s $2.75 million. Where are those kids going to come up with that much money on 400 cows? As one of the Amarillo participants said, almost incredulously, "if I die, my kids would have to sell everything to pay the taxes."
Well, yes. Believe it or not. And remember that the average age of farmers in this country is 55 and more than a third of us are over 65. This ain’t exactly long-term planning for a lot of us.
Second, what a fine program Kevin Spafford has put together. I can’t think of a single thing Farm Journal Media could offer its readership—recalling that average age thing—that would be of more value.
If my family is any indication—and judging by the folks I talked to at the workshop, we are—most farmers and ranchers are poorly prepared for the inevitable. We’ve got wills and estate plans, of course. But we don’t have succession plans, where we drag all the kids and parents together and hammer out a program based on consensus of what everybody wants. Kevin suggests that’s why 70% of family farms fail during the second generation.
Kevin’s got ideas that could put the "success" in succession, so to speak. I sure do wish my parents had generated such a program a generation ago. I hereby resolve to make my family do it in the very near future.
But back to the estate taxes, which just irk me despite the fact that I’m one of those who believe a dollar earned is worth ten dollars inherited. I don’t know any farmers who wouldn’t be caught in a death tax that kicks in at a million bucks.
We read a lot in the papers about the fiscal cliff. Here’s what I think farmers and ranchers should hope (and press their GOP congressmen) for: a compromise that allows Obama to raise INCOME taxes on the rich but holds the rest of the Bush tax cuts in place.
Avoiding the cliff would help avoid a recession that could starve the beef recovery, plus the estate tax is THE crucial threat to all of agriculture. We can live with higher income taxes, but not with 55% estate taxes.