Agricultural News
Farm Bureau Concurs with Congressional Report Showing Real Harm of Estate Taxes
Wed, 25 Jul 2012 14:03:34 CDT
The American Farm Bureau Federation today said it concurs with a Joint Economic Committee report that details the financial harm posed by estate taxes on family businesses. The JEC, a bipartisan committee composed of members from the House and Senate, issued its report, "Costs and Consequences of the Federal Estate Tax," earlier today.
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 percent of the nation's 2.2 million 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.
Economists on the Republican staff of the Joint Economic Committee point out the "Death Tax," as some label it, has robbed almost as much capital stock from the U.S. economy as this tax has generated in revenue in its 96 years of existence. The total revenue produced by this tax in almost a century is only $1.2 trillion, which would barely cover the federal deficit during this budget year alone.
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 percent 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 percent 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 percent of total assets whereas hard assets (including land and buildings) comprised 88 percent of total assets. Alone, real estate accounted for approximately 85 percent 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 percent of farm and ranch assets illiquid, producers have few options when it comes to generating cash to pay the estate tax."
Rather than redistribute wealth in America as its supporters hope, the analysis shows the opposite: the estate tax motivates wealth holders to reduce savings and increase spending now rather than pass it to the next generation - which actually increases the consumption gap between the wealthy and the poor in America.
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 percent, striking a blow to farmers and ranchers trying to transition from one generation to the next.
A majority of members of the U.S. House - 218 - are co-sponsoring legislation (HR 1259) by Brady to abolish the federal estate tax. Senator John Thune (R-SD) leads the effort in the Senate.
You can read a four-page summary of the study by clicking here. To read the full study, click here.
WebReadyTM Powered by WireReady® NSI
Top Agricultural News
More Headlines...