There has been a federal estate tax of some kind since 1916 that has made it more difficult for family farms to be passed down to the next generation. Congress is currently debating a bill that contains changes that would affect what estate tax rates would be for next couple of years. In this week’s From The Ground Up, we talked with an agricultural economist about the impact the estate tax can have on a family farm.
“It is very important for ag, but it’s broader than ag, the reason it’s an issue is there’s a certain number of congressmen, or a certain type of congress persons in Washington who say we don’t need to allow people to transfer a lot of wealth to their heirs without taking part of it.”
Joe Outlaw is an agricultural economist with Texas Agrilife Extension and spends a lot of his time in Washington.
“Most in production agriculture work on very small margins and just think about someone who gets into the business, is acquiring land trying to expand and try and take advantage of some economies of size. All this time they’re making land payments, paying their bills like normal, and they don’t have a lot of cash on hand or cash flow in a given year, but over time they’ve accumulated a lot of wealth because the value of the land has gone up over time.”
Many people have the wrong impression about the kind of income a farm produces.
“The saying has been, ag people live poor, but die rich, but the fact of the matter is that the estate tax, if not planned for accordingly, or if changes are not made, people are going to live poor, and their heirs are probably going to have to liquidate assets to pay for the tax bill they have incurred.”
Outlaw believes agriculture is a unique business.
“Many people, including myself would think that agriculture, for many reasons, is different than the general business economy. The fact of the matter is, if we continue down this road, we’ll have less of an ability to feed ourselves in this country.”
I’m Bob French, looking at the journey our food makes from the farm to our tables, From The Ground Up.