WASHINGTON, D.C. — A repeal of the federal estate tax would affect a small percentage of farmers, while hurting efforts to balance the budget, according to Americans for Tax Fairness.
In a letter delivered earlier this month to members of the U.S. House, the organization stated that ending the tax would "give a huge tax cut to the wealthiest Americans, blow a hole in the deficit and slash revenue needed to protect critical programs and make new investments to create a more productive economy."
The House passed legislation to repeal the tax on April 16 by a vote of 240-179. HR 1105 would end the tax while maintaining stepped-up basis. A companion bill in the Senate (S. 860) has been referred to the Committee on Finance.
President Barack Obama’s administration has said repealing the tax would add $269 billion to the federal deficit over 10 years. He has also voiced opposition to ending the tax.
Americans for Tax Fairness is a coalition of 425 national and state associations, including the American Federation of State, County and Municipal Employees, the Center for Rural Affairs (CRA), the League of Rural Voters and the National Farmers Union (NFU).
The exemption for federal estate taxes in 2015 is $5.43 million per person and $10.86 million per couple. Amounts over the exemption level are taxed at a graduated rate of 18-40 percent. The exemption rose from $1 million in 2003 to $5 million in 2011. It has been indexed regularly for inflation since then.
Most estates – 99.8 percent of them – were not subject to the tax in 2013, the most recent year data is available, according to a March 2015 report from the Joint Committee on Taxation.
"When people talk about how this is decimating family farms and how it creates a hardship for family farms, this simply isn’t true," said John Crabtree, media director for the CRA. "This is a tax that applies to billionaires. It’s a tax on people of great wealth, not a tax on family farmers."
The few farmers who might be affected by the tax would benefit from estate planning, he noted.
"If you have a farm and pass away and owe estate taxes in this day and age, you were asleep at the switch," he opined. "There are things you can do to avoid estate taxes. I’m not talking about cheating, but while abiding by the law."
The continued attempts by some in Congress to repeal the tax are merely acts of political grandstanding, Crabtree said.
"They’re making political hay," he explained. "They can say, ‘See, we’re standing up for farmers, we’re in it for the little guy.’ This is an absolutely political measure."
Crabtree doesn’t think the Senate companion bill will pass, but if it does, he expects Obama to veto the measure. He also doesn’t think there are enough votes to override a veto.
Some people, including farmers, may support a repeal of the estate tax without fully understanding who such a move would and wouldn’t benefit, said Roger Johnson, NFU president.
"We all scan articles and think, ‘Oh good, they’re talking about cutting taxes. It’s immoral to tax the dead after they die.’"
The estate tax exemption already in place is more than adequate, Johnson said. "If I do absolutely nothing to plan for my death and my wife and I die in an accident, we would have had to amass an estate of about $11 million before these taxes are levied," he stated.
"We live in a society where the tax system supposedly is based on an ability to pay. (The exemption) at least meets that criteria. This is not a tax that would hit Ma and Pa Farmer."
Given the opposition from the administration to repealing the tax, Johnson also doesn’t expect the push to end it to be successful.
