Interview: Farm Bureau President Says Estate Tax Uncertainty Causing A “Glut” In Farm And Ranch Sales

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In an ideal world, says North Dakota Farm Bureau President Doyle Johannes, America would simply be rid of the estate tax. Barring that possibility, his organization would like to see the 2012 status quo maintained. But Johannes did tell me in an interview that his organization believes that Congress is going change the estate tax yet again, and the uncertainty over what is to come is causing a glut in farm and ranch sales in the state.

The estate tax has been anything but predictable in recent years. As you can see from this chart, the amount of estate value exempted from the tax and the tax rate has changed dramatically almost from year to year for more than a decade:

Johannes told me that these unpredictable shifts in estate tax policy make planning for small businesses, including farmers and ranchers, very difficult noting that the values of ag businesses can also shift due to changing land prices.

Farming and ranching operations that are hit by the estate tax are often forced to use proceeds from life insurance payouts to pay the estate tax. Otherwise, these businesses have to be broken up to pay the tax rather than kept intact for future generations.

Rob Port is the editor of SayAnythingBlog.com. In 2011 he was a finalist for the Watch Dog of the Year from the Sam Adams Alliance and winner of the Americans For Prosperity Award for Online Excellence. In 2013 the Washington Post named SAB one of the nation's top state-based political blogs, and named Rob one of the state's best political reporters. He writes a weekly column for several North Dakota newspapers, and also serves as a policy fellow for the North Dakota Policy Council.

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  • Harold

    Obama is after the land too or his political allies are. If you have to sell off your property because of the estate tax Obama has imposed then his bundlers can swoop in and buy up the land. Pretty good system of taking property from hard working farmers/ranchers and small business people. Not much incentive anymore to succeed at anything.

    • ND in MD

      “…Not much incentive anymore to succeed at anything…”
      Yes, little barri’s plan is working well – destroy people’s incentives to create,work, save and invert and they will become good democrats voting for more obama phones and other free stuff.

  • Camburn

    The estate tax should be higher. This would provide a pool of resources that young people could use to start a business in farming. As it is right now, the pool is tied up and not liquid. Not a good thing long term for ag.

    • jl

      You’re an idiot. If you want a “pool of resources” that young people could use to start a business in farming, let their parents assets pass directly to them untaxed. By defintion, that would be a much larger pool than what you describe, comrade.

    • tony_o2

      Why not raise the estate tax to 100%? Confiscate it all when someone dies. Even if their children worked for part of their life to help the parents on the farm, it’s not like they should be allowed to leave them anything. /sarc

  • tony_o2

    I worked for a man that payed his son an obscene amount to do the same work as the rest of us. He told us that if he was to die early, his son would need the money to buy back the company from the IRS. He paid us decently, but didn’t have the resources to pay us more.

  • dakotacyr

    What a bunch of Hooey!

    Let’s look at the real facts:

    FACT: 99.87% of estates do no pay any estate tax at all. (Urban-Brookings Tax Policy Center Table T11-0156).

    FACT: Those estates that do pay a tax, the effective tax rate is barely 15%. (Urban-Brookings Tax Policy Center Table T11-0160)

    FACT: Only a small number of farms are subject to the estate tax, approximately 40 farms in the entire country. (Urban-Brookings Tax Policy Center Table T11-0158. To put it another way, it amounts to one estate out of every 65,000 people who die each year.

    FACT: For those estates that do face a tax bill, there are special provisions in the tax code that allow for payments to be spread out over 15 years and this would prevent the estate from having to sell any of the estate farm assets.

    Perhaps the Farm Bureau ought to leave the histrionics behind and actually look at the real facts and what really is happening with the estate tax.

    And Rob, you could certainly leave the histrionics behind. You wrote:”the tax rate has changed dramatically almost from year to year for more than decade.” Your chart shows something different. Most years there is a 1% difference and the facts show that estate don’t end up paying this rate if they pay any tax at all.

    The sky will not fall for farmers, but leave it to the Farm Bureau to scream,”the sky is falling, the sky is falling.”

    • http://sayanythingblog.com Rob

      I think a swing of millions of dollars per year in exemptions from year to year is pretty dramatic. This clearly makes estate planning difficult.

      As for the argument that only a few taxpayers end up paying it, it is a small number, but you act as though breaking up only a few family farms every year is just a-ok.

    • TickedOffRancher

      First of all, those statistics are from 2011, which in case you didn’t know is last year. That is to say that majority of estates passed on now are under a value of 5 million. Under the NEW tax policy, estates with a value over 1 million will be taxed at 55%, now genius, how many farms and ranches does that include?

      Maybe you fail to realize that farm and ranch land prices in the US are skyrocketing to a price that if a person were to buy land to farm or ranch, they would never be able to make it pay for itself in their life time, or their next generation’s life time. When most farms and ranches started, they were homesteaded and handed down through generations, the estate tax, even back in 2001 when it was last at $675,000 was affordable because the price of land wasn’t over inflated. Now unless you’re already filthy rich, one cannot afford to go into farming and ranching, this is why the industry has such a problem getting younger generations involved, it’s not like a decade ago where you could work hard and pay it off, It will NEVER pay for itself with the land prices over inflated like they are.

      So bringing this back to the estate tax, when a family now tries to pass down the family business (farm or ranch), the descendant that is to carry on the operations is expected to pay 55% the over inflated fair market value of that business to continue doing business. Farmers and ranchers are asset rich and cash poor. You don’t see me in name brand clothes driving new tractors and cars. The cash value of the land from the “look at me! I’m wealthy” standpoint is worthless. I could care less if my ranch was worth 5 million dollars or one cent, it means nothing to me, I’m never going to sell it. It was worth a fraction of that when my family started it. If your income was around $90,000 a year to support two families, would you be going out and buying a house that cost 2.2 million dollars? No, because you can’t afford it. So how do they think a ranching operations worth 5 million dollars with an income of $90,000 to support two families can afford to pay 2.2 million in taxes over 15 years (that’s around $147,000 per year) and survive?

      Maybe you need to look into where your food comes from and decide if you still support this realizing that vast majority of farms and ranches are family owned.

      What do you think about it now?

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