Death taxes: Only for the 1 percenters

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Most Americans know there are three, unalterable facts of life: death, taxes and farmers howling about “death taxes.” And just between you and me, there’s an-oft whispered, rarely acknowledged fourth fact of life: Nearly every farm leader knows there’s no such thing as a “death tax” — federal taxes due upon death — for 99% of all farmers.

That’s not an opinion; it is a provable fact. The U.S. Department of Agriculture’s Economic Research Service again confirmed it in a 23-page analysis of the American Family Plan, the pending White House tax proposal, in September.

The analysis, wrote ERS, “suggest(s) that of the estimated 32,174 family farm estates in 2021, 1.1% would owe capital gains at death, 18.2% would not owe capital gains taxes at death but could have deferred liability if the farm assets do not remain family-owned, and 80.7% would have no change to their capital gains tax liability.”

Small number. In one way, the farm leaders were right. The number of estimated farm estates to be taxed under the Biden plan is higher than the number under current tax law. That number, according to a March 2021 ERS report, is incredibly tiny.

“For 2020, ERS forecasted 31,394 farm estates would be created from principal operator households, and out of those, 0.6% — or 189 estates — would be required to file an estate tax return, and only 0.16% of the 31,394 farm estates will have an estate tax liability.”

That means 50 — as in 5-0, or one per U.S. state — “farm estates have an estate tax liability.”

Under the proposed changes, that average rises to seven per state.

No crisis

As the numbers make clear, neither today’s tax laws nor the proposed American Family Plan creates a “death tax” crisis in any state or the nation. In fact, hardly any American — including American farmers — pay taxes after “death.” And “hardly” means hardly.

According to 2020 estimates compiled by the non-profit, non-partisan Tax Policy Center, “About 4,100 estate tax returns will be filed for people who die in 2020, of which only about 1,900 will be taxable — less than 0.1% of the 2.8 million people expected to die in that year. Because of a series of increases in the estate tax exemption, few estates pay the tax.”

So it’s not just farmers not paying “death taxes”; 99.9% of all Americans who die don’t pay a penny to undertaker Uncle Sam. That means “death taxes” apply to only the 1,900 Americans either so rich upon death they can’t avoid some taxes or the few who die without a plan to avoid taxes.

Politicians

The facts, however, never get in the way of politicians preaching the horrors of phantom death taxes destroying the American family farm. A month before the Biden tax plan became public this spring, South Dakota Sen. John Thune argued that even “One family or business lost to the death tax is one too many.”

And Thune, the U.S. Senate’s second most powerful Republican, wasn’t alone. There was a bipartisan race to the microphones by virtually every House and Senate member to denounce death taxes on family farms despite clear evidence that virtually no family farm pays any estate taxes.

No mind, on Sept. 13, “The House Ways and Means Committee … released a section-by-section fact sheet on the tax provisions in the [Biden tax] bill to be considered by the committee … that did not include any references to changes in stepped-up basis for estate taxes,” noted the Hagstrom Report.

So, glory hallelujah, Congress has once again protected every “family farmer” from onerous “death taxes” that only 50 farm estates now pay. Now, hopefully, they’ll tackle other critical issues like whether the Brooklyn Bridge is actually in Brooklyn.

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Alan Guebert was raised on an 800-acre, 100-cow southern Illinois dairy farm. After graduation from the University of Illinois in 1980, he served as a writer and editor at Professional Farmers of America, Successful Farming magazine and Farm Journal magazine. His syndicated agricultural column, The Farm and Food File, began in June, 1993, and now appears weekly in more than 70 publications throughout the U.S. and Canada. He and spouse Catherine, a social worker, have two adult children. farmandfoodfile.com

2 COMMENTS

  1. lol! A 700% increase, from 50 to 350, in those paying the “death tax” is “hardly” any!

    “About 4,100 estate tax returns will be filed for people who die in 2020, of which only about 1,900 will be taxable — less than 0.1% of the 2.8 million people expected to die in that year.”

    You’re mixing your factors, here. If 4,100 returns are filed, and 1,900 will be taxed, then it’s not “0.1%”, it’s nearly half!

    Somebody seems to have an agenda to downplay the tax increases brought about by the Quid Pro Joe administration.

  2. It’s not the death tax that the family farms need to worry about, it is the step up capital gains tax that will kill the family farms. Someone needs to check their facts!!!! In Ohio farm land is currently selling for over $10,000 an acre. Your father inherited the current 200 acre farm from his father twenty years ago at the step up value of $2,000 or $400,000. He passes away and you inherit the family farm at $10,000 an acre or step up value of $4,000,000. That is a step up value of $3,600,000 well over the $1,000,000 exemption. You owe taxes on the capital gains of $2,600,000. Read the bill!!!!

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