Facts on Death Tax Support for Stepped-Up Basis AFBF Testimony 1999 AFBF Testimony 1998 Estate Tax Facts H.R. 8 Cosponsors

Estate Taxes

Background

Individuals, family partnerships or family corporations own ninety-nine percent of U.S. farms. Death taxes threaten the continuation of these family-owned agricultural operations.

Death taxes can destroy family-owned farms and ranches when the tax, which can be as high as 55 percent, forces farmers and ranchers to sell off land, buildings or equipment otherwise needed to operate their businesses. When farms and ranches disappear, the rural communities and businesses they support also suffer. Farmland located close to urban centers is often lost forever to development when death taxes force farm families out of business.

While estate planning is sometimes effective in protecting farm businesses from over-burdensome death taxes, estate planning tools are costly and require resources that could be better used by farmers and ranchers to operate and expand their businesses.

Legislative History

In May the House Ways and Means Committee approved in a bipartisan vote H.R. 8, the Death Tax Elimination Act of 2000. The bill repeals death taxes in 2010. When death taxes are repealed in 2010, up to $5.6 million of assets will retain stepped-up basis. Estate tax rates are reduced by about 15 percent over 10 years and the lowest rate is reduced from 37 percent to 18 percent immediately.

AFBF Policy

Farm Bureau supports elimination of death taxes. Until this is accomplished, we support lowering estate tax rates, increasing the estate tax exemption to at least $5 million and indexing the exemption for inflation. We support unlimited special use valuation adjustments and an increase in the gift tax exemption.

Farm Bureau supports the continuation of "stepped-up" basis-which adjusts the value of property for inflation at death. Without this adjustment, farmers could pay high capital gains taxes making it more difficult for land to be sold to beginning farmers and farmers wanting to expand their business.

Action

Congress should end death taxes. Farm Bureau supports passage of H.R. 8.