Given that the current rate is going to expire in at the end of the year, and given how important the issue is to those involved in agricultural production, as well numerous others, the estate tax is a looming issue that could become an interesting policy and political point in the upcoming 2010 elections.Jacqui Fatka has a recent post on the subject from the Farm Progress blog, American Agriculturist. Fatka raises concerns that the budget deficit and political pressure on Capitol Hill may make passing a permanent repeal of the estate tax a steep hill to climb. Fatka reports that the estate tax is set at 45 percent for estates valued at over $3.5 million for one person or $7 million per couple. “The President’s budget proposed freezing the estate tax at this level so it could be dealt with at a later date.”
Under current law the estate tax will be fully repealed for the year 2010, but in 2011 the tax reverts back to the rate it was under the Clinton administration, which means that the exemption will be $1 million instead of $3.5 million and the tax rates on states worth more than $1 million will be 55 percent.
Fatka reports that recently Reps. Shelley Berkley (NV), Kevin Brady (TX), David Nunes (CA), and Artur Davis (AL) have introduced a bill to deal with the estate tax. The legislation is H.R. 3905, the Estate Tax Relief Act of 2009. To view the bill click here. This bill would phase-out the estate tax by dropping the rates from 45 percent to 35 percent “by 1% increments from 2009 to 2019. The bill is indexed for inflation after 2019.” The exemption level would increase by $150,000 per year, starting at a $3.5 million exemption and leveling off at a $5 million exemption by 2019.
According to Fatka, agriculture organizations are seeking provisions that exempt farm assets of an estate from being counted in the tax as long as the estate remains in agricultural operation. Additionally, agriculture organizations are pushing for the highest exemption level they can get. These provisions are part of another bill, H.R. 3524, the Family Farm and Conservation Preservation Act introduced by Mike Thompson (CA) and John Salazar (CO). To view this legislation click here.
The estate tax tends to catch farms more than other estates, according to the US Department of Agriculture’s Economic Research Service (ERS). “[F]arm estates are 5-20 times more likely to incur estate taxes than other estates.” The ERS estimates “one in ten farm estates (farms with sales of $250,000 or more annually) are likely to owe estate taxes in 2009. Most of the time, these assets have already faced taxes two or three times over the course of a lifetime.”
Given these numbers, it is no wonder that this issue is very financially compelling for those in the agriculture industry. Whether or not there is the political will to work on a bi-partisan solution that satisfies American agriculture, particularly when it can be a hot campaign issue for 2010, is anyone’s guess.
To read the Fatka post on the American Agriculturist blog click here.
Posted: 11/10/09
