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Ranchers Need Permanent Estate Tax Relief

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More than 30 agriculture groups are urging Congress to repeal the death tax.

limousin bread heifer in pastureI celebrated my 25th birthday earlier this week at a small steakhouse in Letcher, SD. While enjoying steak tips and wine, one of our neighbors joined us at our table. We started visiting about the election results, and soon, the sobering topic of the death tax came up. He said his friend ended up paying $2 million in estate taxes in order to save the family ranch after the death of his father. The conversation continued with talk of estate planning, gifting land and putting assets in a trust for the next generation before it’s too late.

The estate tax, otherwise known as the death tax, punishes farm and ranch families, who might be asset rich but are typically cash poor. These families end up buying their land multiple times over in tax fees as each new generation inherits it.

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According to a recent poll on our beefmagazine.com homepage, 36% of our readers are concerned about the estate tax.

Current estate tax relief is set to expire at the end of 2012 with exemption levels dropping to $1 million/individual and the tax rate increasing to 55%. While a permanent and meaningful repeal of the estate tax would be ideal, the National Cattlemen’s Beef Association (NCBA), along with 30 other agriculture groups, supports a minimum of extending the exemption level to $5 million/person with a top tax rate of 35%.

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In a recent press release, NCBA President J.D. Alexander says, “If Congress allows current estate tax relief to expire, it will have a devastating impact on the cattle industry. America’s farmers and ranchers are small business owners who cannot afford to foot the bill for government inaction. The fate of American agriculture and our economic recovery rests on there being certainty in the tax code and continued relief from the burdensome death tax.

“NCBA stands with our partners in agriculture in urging Congress to act by the end of this year to renew the current estate tax relief until full repeal of the estate tax is possible. We will continue to make this our top priority until there is certainty in the tax code and rural America is relieved from the devastating effects of the estate tax.”

For those outside of agriculture, talking about a repeal of the estate tax probably sounds foolish, especially in a time when our nation faces an extreme deficit issue and sluggish economy. But if we don’t support our nation’s food producers -- the backbone of this nation’s economy -- the repercussions could be extremely disastrous. It’s critical for all of us to visit with our members of Congress and urge them to repeal the death tax and provide relief for farmers and ranchers. There are other ways to climb out of our financial troubles; taxing hardworking ranch families isn’t one of them.

Are you concerned about the estate tax? How will it impact your family’s operation if the tax levels significantly increase and the exemption goes to $1 million?

Discuss this Blog Entry 10

Anonymous (not verified)
on Nov 15, 2012

Hopefully all of my property will be given away by the end of the year . It has been a 30 year process. I just hope we still own. Property to worry about when the inevitable happens.

James Lee Adams (not verified)
on Nov 15, 2012

Have had some say (national pundits) that so few are impacted by the estate tax. They are not aware or care of the financial contortions and costs of that we all go thru to AVOID the death tax. Have been estate planning and by the time I pay the lawyers, accountants, appraisers, etc. the problem will be solved--I will have no estate

Anonymous (not verified)
on Nov 15, 2012

your hero--bush [who used hi s daddy's rich friends to avoid serving his country in vietnam] -did not repeal this law when he controlled both houses

ThinkTexas (not verified)
on Nov 16, 2012

You idiot. You must really believe the demogouges in your party.
He really was a "uniter and not a divider" before the wars. He would not trample on the Dems which is why THEY made the tax relief temporary.

That's the way government is supposed to work. How may repubs voted for Obamacare?

Anonymous (not verified)
on Nov 15, 2012

My wife and I started gifting land to our kids about a month ago. I called my lawyer yesterday to see how the paper work was going and he said we got in just in time. He was swamped with calls from landowners the day after the election and had to turn them all down because he could not get to them before years end.

Anonymous (not verified)
on Nov 15, 2012

I expect that legislators develop estate tax law based on typical returns to typical business investments. The problem is that ranch investments aren't typical.

The crucial fact is the huge difference in rate of return to capital in ranch investments compared to conventional business investments. Most legislators likely have little understanding of ranch finances.

A typical business would expect at least a 20% rate of return before making the initial investment. Depending on the industry cost structure, this rate of return might require the investment to generate new annual gross income at least equal to 40% of its purchase cost.

Long term returns to ranch investments are less than 1/10 of typical businesses at best, McGrann showing 1.6%.

http://agrilifecdn.tamu.edu/coastalbend/files/2012/06/Making-a-living-9-...

From this magazine awhile back:
http://beefmagazine.com/mag/profit-challenge-sustainability-cow-calf-1201

Anonymous (not verified)
on Nov 15, 2012

I have become nearly a one issue voter on the death tax. In California with a house on 5 acres next door listed at over $1,000,000 it is a bigger issue than most states. And why such a HIGH rate. Why not 1 or 2% on all estates? I cannot find out if gifting 4 million this year and the exemption goes to 3 million, will the exemption be used up, or are gifts this year not going to count against lifetime amount? Could someone clarify this?

Stanko Ranch (not verified)
on Nov 15, 2012

It's not only the rancher and farmer but think of all the small businesses in our rural towns who have passed their family businesses down through the generations to support those of us out on the ranches and farms.

Bob Gwilt (not verified)
on Nov 15, 2012

I feel that the death tax must go.
Belated happy birthday Amanda. Love your blog
and like the picture of you on the porch.

Terry Church (not verified)
on Nov 18, 2012

By not doing away with the Death Tax, the Goverment either doesn't care about the Farmers and Ranchers or they don't realize the true effects this will have on the Agriculture Community and the Country. In either case its not a good situation.

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BEEF Daily Blog is produced by rancher Amanda Radke, one of the U.S. beef industry’s top social media “agvocates.”

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Amanda Radke

A fifth-generation rancher from Mitchell, SD, Amanda grew up on a purebred Limousin cattle operation in which she and husband Tyler are active. She graduated with a degree in agriculture journalism...

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