By Charlyn Fargo
Last week, the U.S. House passed the Death Tax Repeal Act of 2015. If it subsequently gets passed by the Senate and signed by President Obama, it will be one of the most important pieces of legislation for agriculture this year.
That’s because the tax, considered unfair by many, jeopardizes the transfer of assets to the next generation.
The House voted 240 to 179 to pass HR 1105. Here’s what’s interesting – the vote marked the first time in 10 years that the House voted on an estate tax repeal.
There’s a good chance the U.S. Senate will take up the issue, according to the American Farm Bureau. Estate Tax relief ranks as a candidate for tax reform legislation, which high on the priority list. No one’s sure of the timetable for consideration. The Senate would need 60 votes to pass the measure unless it is considered under “reconciliation” which allows legislation to pass with a simply majority.
“Illinois Farm Bureau applauds the strong House vote in favor of death tax repeal,” said Alan Guebert Jr., president of the Illinois Farm Bureau. “Roughly 90 percent of the value of family-owned farms in Illinois is tied to land, buildings and equipment that can’t easily be converted to cash, leaving some farm families unable to cover their enormous tax bill after the death of a family member.”
That’s a terrible place to be in after the death of a loved one.
As farmland values have increased, the problem has magnified.
Illinois farmland values have nearly tripled in the last 15 years. Three out of every 20 farms in Illinois could be valued over the $5.14 million estate tax exemption based on average farmland values, according to the IFB. The problem is the exemption has failed to keep up with increasing farmland values.
At the end of 2012, Congress passed the American Taxpayer Relief Act, narrowly avoiding a return to a $1 million estate tax exemption with a 55 percent tax rate. This legislation provided a permanent exemption of the estate tax of $5 million per individual, 10 million per couple, and raised the top tax rate to 40 percent. While ATRA provided some relief for some farmers and ranchers, fixing the underlying problem is critical. With rising farm land values across America the estate tax will continue to plague farm and ranch families until it is repealed.
IFB credits its grass roots efforts to helping get the measure passed in the House. Leaders called on grass roots IFB members to call their congressional delegates to vote “yes” on the appeal – and they did. Illinois delegation members voting “yes” included Republicans Mike Bost, Rodney Davis, Bob Dold, Randy Hultgren, Adam Kinzinger, peter Roskam and John Shimkus.
That’s a perfect example of phone calls making a difference. Too often, farmers discuss the matter at the coffee shop. Making the phone call to a voting legislator can make all the difference.
And the IFB wasn’t alone. Cattlemen in Illinois and Missouri were active as well. Missouri Cattlemen’s Association President Janet Akers said the death tax threatens the livelihoods of farmers and ranchers across the country.
“Farmers and ranchers are asset rich and cash poor. These assets have been taxed over and over again throughout an individual’s lifetime. There is absolutely no reason to burden the next generation with another tax,” said Akers. “This tax needs to stop.”
National Cattlemen’s Beef Association President Philip Ellis called the repeal of the Death Tax critical to the future of rural America, and rallied members to make phone calls.
“When did it become appropriate to tax death?” said Ellis, a multi-generational rancher from Wyoming. “This is a punitive tax on farmers and ranchers that is inaccurately framed as a tax on the rich. The U.S. Department of Agriculture even names the death tax as one of the top contributors to the breakup of multi-generational farming and ranching operations.”
“The estate tax is a disservice to agriculture because we are a land-based, capital-intensive industry short of funds, and with few options for paying estate taxes when they come due,” said Ellis in a press release. “Unfortunately, all too often at the time of death, farming and ranching families are forced to sell off land, farm equipment, parts of the operation or take out loans to pay off tax liabilities and attorney’s fees.”