Recently my home state of Pennsylvania passed legislation eliminating the 4.5 percent inheritance tax on working farms within the state. This action brings much relief to farm families across the state, mine included, ensuring that future generations will have the ability to continue farming the same land that their ancestors once did without unnecessary economic burdens.
While Pennsylvania farmers may be lucky for this fact, farmers across the nation must still pay estate taxes, also known as the death tax, on property inherited after the death of a family member.
A recent report released by the American Farm Bureau Federation sheds light on this matter showing the real harm that the estate tax brings upon farming and ranching families. The report showed extensive costs from dissolution of family businesses, decreased capital growth, and loss of outputs and income over time due to this tax burden.
The estate tax was also found to impede economic growth from discouragement of savings and capital accumulation. In addition, this tax substantially hindered entrepreneurial business activity for many farms because of lack of sufficient liquid assets to pay for the liabilities imparted.
I’d like to see nothing less than an elimination of the estate tax on the federal level, however, I know right now that isn’t very likely. In the current situation, if no congressional action is taken, on January 1, 2013, the estate tax exemption will be reduced to $1 million per person from the current $5 million with no spousal transfer. The top rate will increase from 35% to 55%.
Congress will continue to discuss possible extensions of the Bush tax cuts and other politicians will bring forth more alternative proposals. However, these round-about discussions do nothing to solve the actual problem.
Action must be taken on the estate tax. It is the responsibility of the farming community to continue to emphasize this fact to our legislators. While total elimination of the tax is the ultimate goal, the best that can be hoped for at this point is an extension of current exemption levels. So keep calling, keep writing, keep emailing, and keep lobbying. The future of many family farms depends on it.