President Obama proposed in his 2013 budget this week an increase in estate taxes, one that has some lawmakers and ag groups fuming. The president wants to lower the current $5 million estate tax exemption per person to $3.5 million and hike the tax rate from 35% to 45%.
That is not going over well with key farm groups like the American Farm Bureau Federation and National Cattlemen's Beef Association or ag lawmakers like Senator Chuck Grassley, R-Iowa.
"Can you imagine the big increase in the value of land that we've had in the last couple of years that would make it laughable if you stop at $3.5 million?" Grassley said.
As for the president's proposed hike in the tax rate on estates Grassley calls it ridiculous to tax savings at a higher rate than you would tax ordinary income. Currently both are taxed at 35%.
AFBF argues farmers and ranchers have worked long and hard to get a $5 million exemption and to reduce the exemption now will make it even harder to pass on farms to the next generation, especially with farmland values on the rise. Grassley agrees.
"We shouldn't have an estate tax at all but we are obviously going to have one," Grassley said. "And even at $5 million it is going to be difficult it will be difficult to pass on farms from one generation to another at that particular level."
NCBA points out farmers and ranchers are asset rich and cash poor, that land and equipment are not cash until they are sold. And when farmers and ranchers are forced to sell land or equipment to pay the estate tax, families lose property that seldom stays in production. Flatly stated, NCBA says this outdated tax is escalating the de-population of rural America and lessening the area for agricultural production.