Farm Groups React Positively to Estate Tax Vote

July 17, 2000

Senate passage Friday of legislation repealing the federal estate tax by 2010 will not only help farm families across the country continue the businesses they have worked long and hard to build, but provide support for the rural communities that depend on these family-run businesses, according to the American Farm Bureau Federation.

"U.S. farming is dominated by family businesses," said AFBF President Bob Stallman. "The majority of a producer's assets are usually tied up in their land, equipment and buildings. When parents die, their daughters and sons are often forced to sell their farms piece by piece to pay huge government tax bills."

The bill, which passed the House last month, totally eliminates so-called "death taxes" by 2010. At that time, $5.6 million of assets per family would retain stepped-up basis, which would protect families from high capital gains taxes if farms or ranches were sold. The Senate voted 59 to 39 in favor of the legislation which now goes to the White House.

Stallman urged President Clinton to sign the bill, although the President has said he will veto it. And with 59 votes favoring the measure in the Senate, an override appears dim without some switching of votes. Stallman called the veto threat "unfortunate and unwise."

He said rural communities have felt the pinch as the economic viability of family farms is put in jeopardy as growers struggle with low commodity prices and high regulatory costs, as well as large tax burdens.

"When farms and ranches have to be sold off to pay death taxes, the rural communities and businesses they support also are hurt," Stallman said. "Farmland near urban areas is often lost forever to development when farm families are forced to sell key aspects of their operation to pay the government."

The Senate action would save the average cattle producer thousands in tax obligations by eventually phasing out estate taxes, the National Cattlemen’s Beef Association said. The measure would provide the families of a 275- to 300-head cattle operation an estate tax reduction of about $30,000 or 23%. Based on cattle industry averages, a 275-head operation has an estimated net worth of about $1 million.

"Assuming every cow on that operation had a calf, this tax reduction would mean the family would have to sell 58 fewer calves to pay the tax," said Dale Moore, NCBA legislative affairs director. As implementation of bill progresses, were it to become law, additional relief would be realized through additional rate reductions until 2010 when full repeal kicks in.

"These are significant dollar amounts that could go a long way toward keeping a family ranch in the family," Moore said. "You can’t ignore the numbers. Keeping a family ranch operating not only helps the families running these businesses, but it also means a lot to the rural communities that have an agriculture base."

"It’s unfortunate that the president has said he will not sign into law a measure that will not only benefit cattle producers and other small business owners, but all of the public," said George Hall, a cattle producer from Mustang, OK, and NCBA president. "The Congress has sent a clear message that family business owners need relief. After years of deficits, this country is running budget surpluses. Why not return the money to the people who earned it?"

"These are our current choices: Spend a substantial amount on accountants and tax lawyers, or pay half of your net worth to meet death tax obligations, or liquidate part of your assets - such as land, cattle or equipment - to pay the tax," Hall said. "And even careful estate planning won't guarantee a rancher won't have to do one of the last two. We'd like to see the president recognize that the death tax hurts family enterprises by putting his signature on a final death tax elimination bill."