The subject of the spring 2007 issue — estate planning — was most appropriate and timely. Regarding the article, “Estate Tax Repeal,” many writers and congressmen, using outdated statistics, continue to assume that only a few estates will be subject to the estate tax. They're wrong, and we must emphasize the fact that the ordinary family farm or ranch will be subjected to the tax because of the rapidly increasing market value of their land.
In Arizona, our land value increase is exceeded only by Florida. Under existing laws, there isn't a farm or ranch in this state large enough to support a family that can pass from one generation to the next without being subjected to the estate tax. The tax burden will be so great that a sale of part or all of the farm will be necessary to provide funds to pay the estate tax.
Complete repeal of the estate tax now appears unlikely, but we must push Congress to reform the existing law to achieve three things:
Increase the exemption
Index the exemption
Change the valuation method for agricultural land from fair market value as currently defined by statute to a taxable value based on its agricultural use value, i.e., the land's ability to produce income to the user-owner.
In Arizona, we use this method of determining our ad valorem tax. The valuation method uses agricultural rent as the income factor and Farm Credit interest rates as the “cap rate” for computing the agricultural market taxable value.
Few people understand the third valuation method. I haven't heard anyone advocate it as a solution to the estate-tax problem. But this approach to valuing the estate, together with raising the exemption and indexing the exemption, will permit farm and ranch properties to pass to family members.
C. Max Killian
Price drives imports
Regarding the April issue article, “Over-30 Impacts” (page 64), the reason Uruguay can export meat profitably to the U.S., even with the 26.4% tariff and the freight, is because the price of meat is high in the U.S. compared to the price of cattle in Uruguay. This has created a big flourish of activity in Uruguay with expanded packing capacity and increased cattle production.
I'm a cow-calf operator with feedlots in Nebraska and South Dakota. I'm also a partner in a packing plant in Uruguay, with one partner being an Alberta rancher and another a New York City meat retailer. Because of these activities, I think I have a pretty balanced view of the beef-trade situation.
Uruguay will not stop sending meat to the U.S. unless the price of meat in the U.S. drops considerably. This marketing window opened partly as a result of the Canadian ban, and it could close as a result of ending the ban, but to suggest that it will close without a substantial reduction in price in the U.S. is ridiculous.
Simply said, as long as cattle prices are high enough in the U.S. to make exporting meat from Uruguay profitable, it's going to happen.