The Estate Tax and Agriculture

Last week the congress passed a tax bill that contained a change in the estate tax for the 2011 and 2012 tax years. Unless something else is done, in 2013 estate taxation will revert back to a level that could be devastating to agriculture. Ashley Batey has more in this week’s From The Ground Up.

“It’s all personal assets. It’s land. It’s equipment. It’s livestock. Any improvements that have been on the land that have value are going to be included in that number.”

Joe Outlaw is an agricultural economist for Texas Agrilife Extension.

“Most people wouldn’t understand that with land values the way they are, that have risen over time, and asset values and equipment costs, it would not take a very large farm whatsoever to hit these levels.”

The estate tax rate for 2011 and 2012 will be 35% on anything over 5 million dollars per individual, or 10 million per couple.
“If nothing is done between now and then, the tax rates are going to go to 55% on a one million per person or two million per couple of anything over that, so that would a substantial hit.”
Most people who make their living as an agricultural producer don’t have large amounts of cash on hand.

“Looking at a million dollar taxable liability, if it was 55%, that $550,000 that that spouse would have to come up with, and pay that tax bill. The likely occurrence is that they’re going to have to sell all or part to pay that bill.”

We asked how Washington determined what dollar amount of an estate should be exempt from the estate tax.

“That’s a completely political, there’s no economic rationale that I’m aware of for that.”

Outlaw says over time the estate tax will make it harder for someone to make a living in production agriculture.

“ You have to have a certain amount of land and assets to be able to make a living off of agriculture and the way it’s going to work out is more than likely, if the trend continues the way it’s been, there will be a continued dispersal of land.”

I’m Ashley Batey, taking a look at Brazos Valley agriculture, From The Ground Up.


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