As Congress continues to debate the quickly approaching "fiscal cliff," many farmers and ranchers across the United States are watching anxiously as the threat of an increased tax burden looms for many, according to a report from the National Association of State Departments of Agriculture.
Tax packages passed during the George W. Bush administration, and extended in 2010, set the current estate tax exemption at $5 million per person with a tax rate of 35%. If the "fiscal cliff" situation is left unsolved on Jan. 1, 2013, the estate tax exemptions will drop to only $1 million per person, with no spousal transfers allowed, and tax rates will rise to 55%.
With 85 percent of farm and ranch assets tied up in liquid items, many agriculture groups worry the increased tax rate could dramatically impact a family's ability to maintain a farm or ranching operation following the death of a family member.
Legislation was introduced last year in the House (H.R. 1259) and Senate (S.2242) to address this issue. Introduced in March 2011 by Rep. Kevin Brady (R-TX), H.R. 1259 has garnered the bipartisan sponsorship of 222 members of Congress but has not moved beyond the House Committee on Ways and Means.
The companion legislation introduced in the Senate by Sen. John Thune (R-SD) has been cosponsored by all Republican members of the Senate Ag Committee but has not moved beyond the Senate Committee on Finance.
Both pieces of legislation would set the estate tax rate and exemption permanently at 35%