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‘Death Tax’ Is Killing Us

Written by Dennis Sun

    To say the death tax is killing us is pretty strong language, but it is also most likely some of the nicest said about the estate tax – you know, the tax some people are dying for.

Almost every year around this time someone in Congress introduces a bill to repeal the estate tax, and good for them. This action sits well with families in agriculture and other small businesses. Senator John Thune (R-S.D.) has just introduced a bill, explaining, “Here in South Dakota, we are land rich and cash poor, leaving roughly one-third of South Dakota farms vulnerable to the death tax, based on cropland values provided by the U.S Department of Agriculture. The death tax imposes a tax rate as high as 40 percent on family farms, ranches and small businesses, which hurt economic growth by discouraging savings and development.” 

Representative Sanford Bishop (D-Ga.) added, “I believe that the estate tax is politically misguided, morally unjustified and downright un-American. It undermines the life work and the life savings of farmers and small- to medium-sized businesses in Georgia and across the nation.” 

We believe both quotes to be true.

An article in the Washington Post also said the estate tax was actually repealed in 2010, but it came back the next year. In the meantime, Congress has increasingly cut the tax rate and boosted exemptions, making it less and less likely that Americans would face the tax.

This year, 2015, the estate tax exemption is $5.43 million, and we get double that for married couples. Anything above the exemption is taxed at 40 percent. The effective rate for most estates facing a tax is significantly lower than 40 percent.

There is also a special use valuation that permits one’s gross estate to be reduced by an additional $1,090,000. To be eligible for special use valuation, the land must continue to be farmed or ranched for 10 years after death and one or more family members must continue to meet two criteria. The first involves participation in management, and the other, in most instances, does not permit cash rent leasing. But there is also a provision that allows the tax to be paid off over 15 years at low interest rates with only interest due the first five years. 

A tax is a tax and pouring honey over it doesn’t help. It is still be bad.

There are ways around the estate tax and some – most notably our U.S. President – believe it is a great way to pay for government, but estate taxes can hurt those affected terribly. In 2013, the most recent records, about $1.4 billion was paid as a result of the estate tax.

The real truth is that eliminating the estate tax in its entirety far outweighs any risks that the tax would fund a federal program affecting tens of thousands of farmers and ranchers not filing estate taxes. Those families large enough to be impacted by the estate tax, if it were eliminated, would be in a position to shift more of their assets away from stocks, bonds and cash and into real property or back into the economy. 

That should be the American way – not paying taxes for more government.