By KEVIN WALKER
LODI TOWNSHIP, Mich. — Farmer Don Rentschler’s blood pressure was shooting up late last month as he watched federal legislators try to work out a deal that could help him with his estate tax quandary.
“You can’t take a chance,” he said at one point, about the three dozen or so farmers in Michigan who were poised to be affected by the estate tax in the near future.
Rentschler said these people have been scrambling to try and do something to avoid a possible big hit in their pocketbooks if the exemption of $5 million on estates and gifts reverts to its previous level of $1 million. But he didn’t seem completely clear on what he was going to do about his situation.
Rentschler, 66, stands to inherit a 500-acre farmstead in an area where land has gotten expensive. Lodi Township is located just to the south of the city of Ann Arbor. He says its proximity to Michigan Stadium means it’s worth more than the average piece of farmland in the state.
A recent assessment valued the land at $8,000 an acre. If that figure were to stand, his land would be worth $4 million. But Rentschler was planning to have it assessed again.
“It might not really be worth that much,” he added.
Rentschler is in a rather uncomfortable position at this stage in his life. His father, 89, still works on the farm to some extent and is in good health. He’s told Don the farm is his as soon as he dies. Don has worked it out so his own son will own part of the farmstead right away, so he doesn’t have to wring his hands about his own financial circumstances for years on end.
Last week Congress voted to pass a compromise bill that keeps the exemption amount for gifts and estates at $5 million and makes it permanent, and raises the tax rate for gifts and estates to 40 percent. A statement from the White House Jan. 2 described the tax deal as bipartisan and extending middle-class tax cuts as well as credits for working families. It keeps the child tax credit and “marriage penalty relief” as well.
Altogether, the measure will prevent the typical family of four from seeing a $2,200 tax increase, the statement said. The deal also raises taxes on individuals with incomes of $400,000 or more and couples making $450,000 or more per year, relative to where it was before year’s end. But the deal also cuts taxes for high-end earners relative to where they stood as of Jan. 1.
“Leaders from both parties in the Senate came together to reach an agreement that passed with overwhelming bipartisan support today, that protects 98 percent of Americans and 97 percent of small business owners from a middle class tax hike,” said President Obama in a separate statement.
“While neither Democrats nor Republicans got everything they wanted, this agreement is the right thing to do for our country.”
Republicans were reportedly unhappy with the deal because it raised taxes on those with high incomes, while Democrats were unhappy because the increases on those same taxpayers weren’t as great as they would have been had the tax cuts simply been allowed to expire. The Michigan Farm Bureau (MFB) was happy with the estate tax part of the deal.
“Michigan Farm Bureau is very pleased with the estate tax provision,” said Ryan Findlay, a lobbyist for the MFB on national legislative issues. “It does one major thing and that is that it is a permanent fix.
“When a family sits down to plan for the future, they are going to be able to do that. For our farmers in Michigan, that $5 million exemption is huge.”