Every day rural America's family farmers and ranchers face great challenges — low commodity prices, skyrocketing energy costs, weather-related disasters, including a record-setting hurricane season, and budget cuts to vital agriculture programs are just a few. Repealing the estate tax should be the last thing these hardworking Americans need to worry about.
Proponents hail repeal as an essential measure to keep American agriculture alive. What they don't understand is the effect the estate tax really has on family farms. A bipartisan Congressional Budget Office report found that under current exemption levels only 300 family farms would be required to pay the estate tax in 2000. In 2009 the number would drop to only 65 family farms.
Estimated costs of repealing the estate tax reach nearly $1 trillion over the next 10 years. Spending such a large sum to benefit very few, while experiencing massive federal budget deficits is unfair to future generations who would be forced to pay back the record debt.
The House of Representatives has already passed estate tax repeal. The House repeal proposal subjects heirs of even modest estates to large capital gains tax liabilities. Lost under repeal is the current estate tax statute's “stepped-up” basis clause. This provision provides for an adjustment in the value of assets based on current value, rather than their original costs, assuring that double taxation rarely applies to inherited farm operations. These benefits could be lost and taxes likely increased if the estate tax is repealed.
What would help America's family farmers and ranchers would be to simplify the tax rules and increase the estate tax exemption. Doing so would subject less than one half of one percent of farms and ranches to the estate tax.
I hope that when the Senate considers estate tax repeal they will take into account the current situation in rural America and vote in support of our family farmers and ranchers.
Dave Frederickson is president of the National Farmers Union.