Editor's note: The following commentary was written by Mike Barnett, Director of Publications at the Texas Farm Bureau and published at the Texas Agriculture Talks website.
The cost of dying would have been a lot higher on Jan. 1 if Congress hadn’t stepped in at the last minute and dealt with the estate tax—commonly known as the death tax in farm country.
The certainty of what was passed into law and signed by the president beats the disastrous consequences if Congress hadn’t acted. We were looking at a $1 million exemption with an onerous 55 percent tax rate for the beginning of the New Year. That placed a bull’s eye squarely on the backs of almost every Texas farmer and rancher and would have taxed their heirs out of business.
Instead, we got a pretty good deal.
The agreement extends the Bush era $5.12 million exemption for individuals and $10.24 million exemption for married couples. Even with rising land values, that’s going to cover the assets of most Texas farmers and ranchers.
The exemption is indexed for inflation.
The legislation also includes ?stepped-up basis? language which allows heirs to mitigate significant increases in farmland values of inherited property.
Instead of a temporary fix, the provisions have been made permanent, or as permanent as things can be when dealing with lawmakers and budget issues.
Unfortunately, the taxable rate rose from the 35 percent of the Bush era to 40 percent. President Obama wanted a 45 percent rate.
Sometimes compromise is necessary.
Elimination of the tax altogether is preferable. But that is not realistic in this age of fiscal deficits and runaway spending.
Nothing is sure in life but death and taxes, but this legislation makes both just a little bit easier on the loved ones you leave behind.