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RSS By: Steve Cornett, Beef Today

Read the latest blog from Steve Cornett.

Death Taxes: What Would Willy Do

Sep 20, 2010

The estate tax—“death tax” I’m supposed to call it—is zero today. It will revert to 55% next year if this most fractious Congress in memory doesn’t act between now and then.

Many if not most of the people who read this will be impacted. Many, if not most, would just prefer their heirs keep as much as possible.

On the other hand, whatever else seems to have been agreed upon at that Ft. Collins concentration hearing last month, it seems everybody wants to make it easier for young people to get started in agriculture. At least nobody spoke in favor of making it harder.

This is an argument we’ve been having since it applied to me. The average age of farmers is getting older. It costs too much to get started farming. We should do something.

That’s the Willy Nelson argument. Farmers are good. Agriculture is a noble pursuit. We should do something. That is so right and so easy to think and say.

And so hard to figure out.

The government folks didn’t mention the estate tax in Ft. Collins, but several producers did. It’s hard to think how even people in D.C. can proclaim themselves dedicated to providing young people opportunity without considering the implications of the estate tax.

They are many. We’re all agreed that if the tax is too heavy, you limit incentive and make it difficult to pass along the sort of capital it takes for young people to succeed in agriculture, and cattle in particular.

But is there some value to that? If your goal is to provide opportunity to young people in a profession that has always centered around “living payment poor” and “dying land rich,” would it be better to force land back onto the market each generation? To force each new generation to earn its own way?

In other words, what if congress doesn’t renew the estate tax deductions? Fifty-five percent of current land prices is more than the stuff is worth. Your kids would have to pay more in taxes than you paid for the place to begin with.

You can do the math on your own place. Or your parents’ if you’re of that age. But what of the impact on the general cattle business?

Check this blog next week for some scenarios that look at that potential impact.

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