The estate tax is levied on few farmers and ranchers, but Republicans still are pushing for its repeal.
When President Donald Trump and GOP leaders unveiled the framework for their tax reform package last week, they promised to vanquish what they say is a longtime foe of the American farmer: the estate tax. Called the “death tax” by its enemies, it requires individual estates valued at more than $5.45 million ($10.9 million for married couples) to pay back a portion of assets to the government when passed to heirs. The tax generally only affects the very rich — it applies to only one out of every 500 estates. The tax is projected to add almost $300 billion to federal coffers over the next 10 years.
Though only 1 percent of Texas farmers and ranchers would possibly be subject to the tax, leading Texas ag industry groups and GOP lawmakers have made repeal a priority.
“This is always one of the big applause lines for them, even though it affects hardly anyone,” said Dick Lavine, a senior fiscal analyst at the Center for Public Policy Priorities. “It’s just part of the ideology that rich people should get to keep everything they have, and so should their children and their grandchildren.”
In the lead-up to the release of the GOP tax reform plan, called the most sweeping overhaul in decades by analysts, Texans in Congress issued a steady drumbeat of proclamations for an estate tax repeal. In January, U.S. Representative Mac Thornberry, who represents a mostly rural swath of the Panhandle and North Texas, sponsored the Death Tax Repeal Act, which would eliminate the estate tax and other related taxes. Representative Jodey Arrington, R-Lubbock, signed onto the bill as a co-sponsor, as did Representative Mike Conaway, a Midland Republican who chairs the House Agriculture Committee.
“Death should never be a taxable event,” Thornberry wrote in an April press release. “Small business owners, farmers and ranchers are particularly vulnerable to the death tax, making it more difficult for future generations to build upon their family’s hard work.” In a September speech, U.S. Senator Ted Cruz said it was a vestige of an “antiquated, bureaucratic, ineffective tax system.”
Ag industry groups are in lockstep with lawmakers. Texas Farm Bureau spokesperson Gene Hall called the estate tax “an artifact” of a system that needs a tune-up. Jerry Fuchs of the Texas and Southwest Cattle Raisers said repeal of the tax is “at the top of many of our members’ minds” because of the tendency for ranchers to own vast plots of property but have relatively few liquid assets, a phenomenon known as being “land-rich but cash-poor.”
A small number of well-off agricultural producers in Texas could be subject to the tax, such as 65-year-old rancher Pete Bonds, who owns thousands of acres of ranchland in Texas and New Mexico. He told the Observer that when he dies, his estate likely will be taxed because its assets are valued above the threshold of $10.9 million. Bonds said he’s also paid “hundreds of thousands of dollars” to attorneys to navigate the estate planning process, along with taking out a $15 million life insurance policy on himself and his wife to help his three daughters shoulder the coming tax bill.
“This is money that’s leaving our business. We could be using it to buy more cattle and buy more land,” Bonds said, adding that he supports a full repeal of the estate tax because it unduly burdens agricultural producers. “We need to get rid of the son of a bitch.”
In Texas, a majority of farms were valued at $500,000 or less in 2012, making it unlikely that the transfer of those estates would trigger an estate tax bill. According to the most recent available U.S. Department of Agriculture statistics, only 1 percent of farms in the state reported values of $10 million or more, and not all of those estates will have to pay the tax.
The worst-case scenario, opponents say, is that the tax could force heirs to sell the farm — so to speak — to pay the tax.
Lavine, the fiscal analyst, is quick to point out that critics are rarely able to cite instances in which the tax burden has forced heirs off family land. At a recent tax reform rally in Indiana, Trump invoked a “small family farmer” whose estate would be decimated by the tax. The farmer later was revealed to be a multimillionaire business owner who nearly won a Republican Congressional primary in 2016.
“You always hear stories that it’s alleged to have ruined the farm that’s been in the family for generations,” Lavine said. “They just have a lot of trouble finding actual examples of somebody who’s been hurt by that.”
Bonds, the rancher whose estate likely will be taxed, said the number of small number of estates affected by the tax is a non-issue. “I don’t give a damn if it’s two people (who are affected), fair is fair,” he said. “You work hard all your life, you’re successful, and then you can’t pass it on. My kids are going to have to buy this land back from the government.”
Lavine, on the other hand, said well-off estates have a social obligation to pay. “You’ve been able to amass all these assets because we have this stable political and economic system, which is supported by tax money,” he said. “You’ve benefitted from that, and you should contribute to continuing that.”