The Estate Tax and Family Farms

We recognize the importance of protecting America's family farms, and the estate tax has many special provisions that do so. But this concern — the rationale usually advanced for eliminating the estate tax — can be addressed by amending the existing estate tax system.

The effect of the estate tax on farms has been greatly exaggerated.
According to the IRS, of the 2.3 million people who died in 1998, only 650 left an estate with significant farm assets. A Treasury Department analysis found that estates that included family farms paid less than 1% of all estate taxes. On April 8, 2001, the New York Times reported that the pro-repeal American Farm Bureau Foundation could not cite a single case of a family farm lost due to the estate tax.

Proponents of estate tax repeal have rejected reforms that would have protected family farms.
In 2001, the Senate rejected a Democratic reform proposal that would have tripled the family business exemption to $4 million for individuals, $8 million for couples. That reform would have exempted the vast majority of farms and small businesses that currently pay estate taxes.By taking an all-or-nothing attitude, and refusing to compromise on reforms that would protect farms, pro-repeal forces have shown that they don’t really care about family farms. In addition, 49 of the 51 Senators who voted to repeal the estate tax in 2000 also voted for the disastrous 1996 "Freedom to Farm" act that has hurt family farmers and led to greater corporate control of agriculture.

Many farmers are unaware that there are reform proposals that would protect their farms.
In 2000, New York Times reporter David Cay Johnston interviewed six people named as "estate tax spokesmen" by the National Federation of Independent Business and the American Farm Bureau Federation. Only one of them was aware of the Senate proposal to triple the family business exemption.

There are already special estate tax rules for family farms.

• Farmland can be valued at between 45% and 75% of its fair market price.
• Any taxes due can be paid over 14 years, at interest rates as low as 4 percent.
• Unlike most couples, farm couples can exempt up to $2.6 million from taxes.

Repealing the estate tax will help mega-operations at the expense of small farms.
Chuck Hassebrook, executive director of the Center for Rural Affairs in Walthill, NE, argued in a 1997 New York Times op-ed that estate taxes help to level the playing field in farming. Repealing the estate tax will remove the only brake on further expansion by mega-farms.

Many of the wealthiest "farmers" aren’t farmers at all.
A significant number of the "family farmers" who would benefit from an estate tax repeal are actually wealthy urban landowners who own a ranch or horse farm as a vacation getaway.

Responsible Wealth, 37 Temple Place, 2nd Floor, Boston, MA 02111.
Voice: 617/423-2148 Fax: 617/423-0191.
© 2002 Responsible Wealth. All rights reserved.