Commentary: Should death really be taxed?

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Editor's Note: The following commentary was written by Glen Cope, a fourth generation beef producer in Southwest Missouri, is chair of the American Farm Bureau Federation’s (AFBF) Young Farmers and Ranchers Committee. His commentary was originally published by AFBF’s Focus on Agriculture.

Two things in life that often bring about the most grief are death and taxes. So when these two are combined, it makes for a cocktail of anxiety. Isn’t it enough that a family must deal with the grieving that comes from the passing of a loved one? Yet, political leaders in Washington, D.C., find it necessary to exacerbate that grief by taxing the occasion.

Most young farmers and ranchers have worked from an early age alongside their parents on the family farm, making it a joint effort to improve the farm, pay bills and reduce debt. Not only do young farmers have a vested interest in the farm, but they consider themselves co-owners. So, you can imagine our frustration knowing that the inevitable is lurking behind the barn door. After our parents pass on, the Internal Revenue Service will demand a sizable portion of the family farm. 

Farmers are, as the old phrase goes, “asset rich and cash poor.” Unfortunately, when parents pass, the estate tax is triggered because of high land prices. A fact that most people in this country don’t understand.

The average age of the American farmer is 57. So, at an age when most Americans are preparing for retirement, farmers are still hard at work. As the average age of farmers increases, the need for permanent repeal of the estate tax is all that much more important. Especially if we want young people to return to the farm. Stifling their ambitions by imposing a death tax that penalizes their achievement is not an incentive.

On Jan. 1, 2013, the death tax will fall back to its original position of having only a $1 million exemption toward the value of the estate and then it will be taxed at a rate of 55 percent.

To give you an idea how little a $1 million exemption will go toward easing the mind-numbing pain felt by this hideous tax; if a farm valued at $3,000 per acre fell under the death tax, only roughly 333 acres would be exempt. However, many farmers will tell you in today’s world, 333 acres will not go very far to support one family, let alone two and sometimes three generations that may rely on the farm to provide their livelihoods.

There are many events in which taxation can come into play throughout a person’s life. For example, sales tax when we make a purchase and capital gains tax when we sell something at a higher price than what we paid. When we own something, we even pay a property tax. We pay Social Security taxes toward our retirement. So the question must be asked; if we are taxed in this country seemingly every time we make a move when it comes to spending, saving and making money, should we be taxed simply because we have taken our last breath? Should we make it more difficult for our children to continue the family farm? The majority of farmers and ranchers would argue the answer is most definitely NO!



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fords prairie farmer    
texas  |  July, 10, 2012 at 09:20 AM

If members of congress can learn to work together the problem can be solved. If not, all young farmers and ranchers need to buy life insurance for their parents and consult competent CPA's for advice. Depending on the circumstances it might be wise to start buying the parent's land a little at a time. And, start buying life insurance on yourselves now while it's cheap so your children won't have this problem.

sdcpa    
SD  |  July, 10, 2012 at 09:47 AM

Its a very complex issue- Many argue against all death taxes based on double taxation, however, most estates subject to the federal estate tax are due to highly appreciated property which has never been taxed. Our current exemptions protect up to $10 million for a married couple which exempts most farms. The elimination of stepped up basis on death will subject future sales to capital gain taxes which are slated to move to 20%, which is painful as well. I fear Congress will do nothing about tax reform, let tax reform "fall off the cliff" to collect excessive taxes and blame each other for not reaching an agreement just to allow them to continue their pattern of foolish spending.

Bob    
Missouri  |  July, 10, 2012 at 10:30 AM

There are a lot of things that shouldn't be taxed. We've seemed to create a government whose solution to every problem is another regulation or more taxes.

Wally    
VA  |  July, 10, 2012 at 10:58 AM

As usual, fear of the estate tax is totally overblown. A few hundred dollars spent on a tax expert/estate planner ensures that no tax will be paid on 99% of inherited farms. Don't worry, Congress will fix this. The heirs of Warren Buffet and Bill Gates and George Soros and the Koch brothers will likely pay some estate tax.

Louise    
CA  |  July, 10, 2012 at 11:33 PM

Our family had to sell the farm that had been in the family since the 1860's to pay the estate tax. All of us had worked on the farm from the time we were little. The government wanted way more than the farm could produce and still make a living. Prime farm ground is now a residential community of homes and asphalt streets.

michael    
kansas  |  July, 11, 2012 at 10:26 AM

There's only one answer - Hell NO! Double Taxation is wrong, wrong, wrong, no matter who it is, and it exploits the personally defensless Dead. It is also something of a Joke of a Tax, that is easily circumvented by those who plan and can afford high-cost Tax Attorneys. Warren Buffet's Billions will not be taxed one thin dime, and neither will any other mega-rich person with any sense. This type of grave robbing is reserved for the "little guys" politicians always claim to be "helping". Stop them please.


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