Commentary: Farm Bureau to renew push for estate tax reform


Issue Date: October 17, 2012
By Josh Rolph
The high value of California farmland makes estate tax exemption rates critical. Estate taxes could climb on Jan. 1, unless Congress acts.
Josh Rolph

The California Farm Bureau is joining the American Farm Bureau Federation in a national campaign urging action on the estate tax when Congress reconvenes after the November elections. We aim to be sure estate tax reform stays at the forefront as Congress deliberates major tax issues during an upcoming five-week legislative sprint.

Congress has tremendously significant issues to tackle post-elections in the "lame-duck" session finishing out the 112th Congress. It is vital that estate tax law isn't forgotten.

That's where you come in. If Congress fails to address the estate tax, we risk a major increase in the tax that could cause serious harm to California's farm and ranch families.

Without doubt, the issues that Congress must deal with as this session moves to adjournment at year's end are extremely important, affecting every American individual and business as well as the overall fiscal health and military strength of our nation.

These budget and tax issues rolled together have come to be known as the "fiscal cliff," a term first used early this year by Federal Reserve Chair Ben Bernanke, who defined it as the major tax increases and budget reductions already scheduled for Jan. 1, 2013.

Together, these scheduled tax increases and budget reductions are calculated by the Congressional Budget Office to help the U.S. shrink the growing deficit. While a shrinking deficit is a good thing, the economic impact of the fiscal cliff means that the economy would respond by contracting in the short term, with another jump in unemployment. Politicians on both sides of the aisle say they wish to prevent this from happening.

As you can appreciate, the fiscal cliff is the biggest, most polarizing issue of consequence in Washington. This polarization is the principal reason nothing has happened to address the fiscal cliff, besides the two competing proposals offered by each party in the summer.

The divided Congress—Republicans who lead the House and the Democratic majority in the Senate—each put forward their respective plans to address the fiscal cliff, knowing that neither proposal was expected to be signed into law. It was understood that any chance for compromise was too risky politically and should therefore be postponed until after the elections.

The current schedule has Congress returning to Washington on Nov. 27, with very little time to pull together a meaningful bill.

Without congressional action, income tax and capital gains rates for individuals and businesses would significantly rise. Many deductions would also expire. At the same time, an across-the-board budget cut, also called "sequestration," would reduce spending, with the most dramatic cuts scheduled to be absorbed by our military.

And not as frequently talked about, the temporary two point reduction in the payroll tax is expected to expire in January. For farmers already feeling tremendous strain amid regulatory pressures and California's surging gas prices, even this payroll tax increase, as small as it seems, could almost be too much to bear. I suspect that farmers, ranchers and their employees will be in for a shock on payroll taxes, if nothing is done by the end of the year.

The most common question on Capitol Hill is, "What are you hearing?" From my discussions, the consensus on tax reform is that it is next to impossible to know what will happen during the lame-duck session. The common thread is to wait until the outcome of the elections. It's not as easy to predict how this will play out by simply knowing who wins the presidency. Control of the Senate is also up in the air. And with both parties falling on almost polar sides on these issues all year, it is hard to imagine what they might come up with that will satisfy them.

Even more difficult is to know what will happen with the estate tax. Two years ago, an historic deal was brokered that resulted in the best reform short of repeal for the estate tax: an exemption of $5 million indexed to inflation (now at $5.12 million) and the lowest rate since 1931. With the value of California land, a high exemption is critical. If Congress fails to act by the end of the year, the rate will climb to 55 percent for farms valued at more than $1 million, an amount that will surely mean that thousands of farmers will be subject to the estate tax.

We ask you to stay tuned to Farm Team alerts, where you can be part of the national campaign to reform the estate tax.

Additionally, we ask that you send in your specific story that details how the estate tax would harm your farm or ranch if nothing is done to stop the tax from climbing in 2013. County Farm Bureaus are gathering those stories. Please contact your county Farm Bureau if you have a story to share.

(Josh Rolph is director of international trade, farm policy, taxation and plant health for the California Farm Bureau Federation. He may be contacted at jrolph@cfbf.com.)

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