One of the more enduring myths regarding the estate tax is that it forces family farmers to sell their entire farm when the owner dies, thus depriving them of their sole way to make a living. And Illinois’ Republican Senate candidate Mark Kirk took full advantage of this fear during an appearance before the Illinois Agricultural Legislative Roundtable this week:
We do not want it to be a catastrophic event in the economy of that family’s life, so that the kids who worked on that farm or in that business their whole life suddenly lose it because they can’t meet a 55 percent estate tax that’s just jumped back to life.
Regarding the estate tax, Kirk has said “my preferred rate is zero.”
Before we even get to the unfounded fears that Kirk is playing up to score political points, it should be noted that Kirk is suggesting the currently expired estate tax will come back next year at 55 percent, as current law stipulates. But President Obama and congressional Democrats have proposed permanently reinstating the tax at the 2009 level (45 percent with a $3.5 million exemption), only to be stymied by Republicans in the Senate. If the 55 percent rate does come back, it’ll be due to GOP obstruction.
But back to Kirk’s insistence on scaring farmers. According to the U.S. Department of Agriculture, only 1.6 percent of all farm estates in the country would be subject to the estate tax at the 2009 level. And a Congressional Budget Office study found that “all but a handful of the farm estates that would owe any tax under the 2009 parameters would have sufficient liquid assets on hand (such as bank accounts, stocks, and bonds) to pay the tax without having to touch the farm or business.”
Those exceedingly few farms that might have a cash-crunch problem “would have other options — such as spreading their payments over a 14-year period — that would allow them to pay the tax without selling off any of the business or farm assets.” In fact, in 2001 — when the estate tax actually was at 55 percent — the American Farm Bureau “could not cite a single example of a farm lost because of estate taxes.”
Iowa State University Economist Neil Harl “said he had searched far and wide but had never found a case in which a farm was lost because of estate taxes.” “It’s a myth,” he said. But it’s a myth that persists, and Kirk is exploiting it to push repealing a tax that overwhelmingly affects the super-rich. Incidentally, repealing the estate tax would cost $784 billion over ten years.