Running Out of Time for Estate Tax

Running Out of Time for Estate Tax. I’m Greg Martin with today’s Line On Agriculture.
Congress is running out of time to address the confusion facing estate taxes.  Under the current law, the tax will be repealed at the end of the year, but…

WOLFF: As a trade-off we lose part of the stepped-up basis and that means farmers and ranchers will pay more capital gains taxes when they sell a piece of property.  And at the end of 2010 estate taxes will come back but at a very low exemption level, one million dollars per person and a very high rate, 55 percent. 

American Farm Bureau Tax Specialist Pat Wolff says a million dollar exemption may sound like a lot of money…

WOLFF: But it doesn’t get you much of a farm and it certainly doesn’t get a farm big enough to support a family. Farms are capital intensive.  To be a farmer you have to have land; you have to have equipment and that costs a lot of money.  So if you take a farmers land and equipment away from them to pay a tax when a family member dies, he not only loses his farm but he loses the way he earns his living. 

The house of representatives has already passed a permanent extension of the current law which calls for $3.5 million per person exemption level and a top tax rate of 45 percent.  But the senate is bogged down in the health care debate and it’s up in the air whether they’ll get to estate taxes before the year ends. 

WOLFF: It shouldn’t take that much time to take a break from health care to do what they need to do and that is to pass significant estate tax relief for farmers and ranchers.  Congress has known for 10 years that they need to act and they need to act before the end of 2009.  There’s really no excuse for putting this off to the last minute. 

Wolff says at a time when the government should be encouraging small businesses, lack of action on estate taxes will hurt them.

WOLFF: To run a successful business you need to be able to plan and you need to be able to plan for more than one year at a time.  When you have an estate tax law that changes every year you add uncertainty to an already uncertain business and that makes it very hard for farmers and ranchers to keep their businesses together when a family member dies. 

Wolff describes what will happen in 2011 if congress doesn’t take action on the estate tax.

WOLFF: Congress should feel embarrassed about allowing the top estate tax rate to go back to 55 percent.  That means that just because you die, the government wants to take over half of your farm or ranch and there’s no excuse for that. 

That’s today’s Line On Agriculture. I’m Greg Martin on the Northwest Ag Information Network.