As I’ve discussed extensively, the currently expired estate tax is scheduled to come back in 2011 at a 55 percent rate with a $1 million exemption. President Obama and many congressional Democrats have proposed permanently setting the estate tax at the 2009 level of 45 percent with a $3.5 million exemption but Republicans, in their constant zeal to reduce the tax burden of the wealthy, blocked that proposal.
Since then, Republicans have been going gangbusters with the claim that the estate tax will devastate family farms across the country. The latest was Sen. Chuck Grassley (R-IA), who “absolutely” agreed with an Agwired interviewer’s assertion that the estate tax will decimate “our farmers of the future”:
Q: I mean, I think that probably, maybe we’ll see your opinion, it just has a huge impact on these people who are major landowners in some cases. Who are going to be our farmers of the future, for example, right?
GRASSLEY: Absolutely, because if we go back to a million dollar estate tax exemption, which is going to happen January 1, we’re going to be selling a lot of farm land to pay estate taxes. And even at $3.5 million, which I think is where we’re going to end up, is still going to be detrimental to some family farmers. But I think that’s where we will end up and I think we’ll do it before the end of the year.
For starters, exceedingly few farms ever pay the estate tax. In fact, in 2001, when the estate tax was at 55 percent with a $675,000 exemption, the American Farm Bureau “could not cite a single example of a farm lost because of estate taxes.” Even if the tax were to come back as scheduled by current law, only one in ten farms would owe any tax at all.
But no one has actually proposed allowing the current law to take its course. Under the Obama administration’s plan to permanently set the tax at the 2009 level — which only needs the approval of the Senate, because it has already passed the House — just 1.6 percent of farms in the country would face the estate tax, according to the U.S. Department of Agriculture. Those farms have an average net worth of about $7 million.
The fact remains that the estate tax overwhelmingly affects the super-wealthy, with nearly two-thirds of the revenue coming from estates worth $20 million or more. Interestingly, Grassley believes that the administration’s plan will be the one that’s adopted, which means he does not see the estate tax cut crafted by Sens. Blanche Lincoln (D-AR) and Jon Kyl (R-AZ) as ultimately becoming law.