Recently, U.S. Sen. Ken Salazar co-introduced legislation to modify the estate tax by exempting farms. As a rancher himself, and as an elected official who strongly represents the interests of rural Colorado, his interest in this matter is understandable. Unfortunately, this legislation is based on misinformation and fear of one of the most important sources of revenue we have as a country.
The estate tax was enacted in 1916 to restrain the wealth inequality in the United States by taxing the estates of the richest 1 percent when wealth is transferred at death. Did you know that, even with the estate tax, 5 percent of Americans owned 55.5 percent of the nation’s wealth in 2004? Imagine how much more of the wealth would be in their hands if there were no estate tax.
The revenue from the estate tax provides billions to fund the critical needs of our country, from local schools, to bridges and roads, to children’s health care, to disaster relief for farming families.
Sen. Salazar has stated that this bill would help actual farmers and ranchers, and not big business developers or wealthy heiresses. But hardly any farm estates pay the estate tax now, so they don’t need this help. This legislation provides loopholes so that the wealthiest in this country can evade this important tax by buying and keeping farmland. In other words, if Paris Hilton’s family decided to raise and sell Shetland ponies, the family could avoid paying the tax and Paris could buy herself another yacht, or maybe a herd of Chihuahuas in diamond studded collars.
Despite the misconception that the estate tax impacts family farms, only the wealthiest people pay the tax. All estates, including farm estates, appraised below $4 million for married couples ($2 million for a single person) are exempt from the estate tax. In addition, farmland can be valued at current use, which is typically much lower than the market value for development purposes, often allowing farming families to avoid the tax.
The Congressional Budget Office studied the number of farm estates that pay the estate tax. At the current exemption, CBO estimates that each year, out of the millions of people who die, only about 123 farms in the entire country would owe estate taxes.
Each year, only 15 of those farms - about .003 percent of American farms - would not have enough liquid assets to pay the tax. The heirs of those farms could arrange to pay the tax over 14 years at a below-market interest rate. They would not need to sell land to pay the tax. Even the American Farm Bureau has not been able to find a farm sold just to pay the estate tax.
Instead of more exemptions, we need an estate tax that provides reasonable revenue for important programs that benefit everyone, like children’s health care, and for programs that benefit farmers, like disaster relief. Sen. Salazar should drop these new tax loopholes for the wealthy and special interests and instead look to real reform that could help farming families and all other Coloradans. |
