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!