Impact of Estate Taxes on Farmers
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Executive Summary

This paper addresses the impact of federal estate taxes on family businesses, with a specific focus on the agriculture and beef industries. The analysis presented here represents a compilation of much of the recent research on how estate taxes burden family businesses and inject non-business criteria into business decision processes. This report also includes the analysis of data provided by nearly 1,000 family businesses on the past and present effects of estate taxes and the owners' expectations of the future. It also quantifies the efforts of these families to plan for and minimize their future estate tax liability.

In addition to examining the impact of estate taxes on family businesses, this paper also assesses the role of family business assets in providing the revenue generated by estate taxes. The data support exempting family business assets from estate taxes:

• Estate taxes make family business owners more risk-averse and result in their adopting a shorter-term focus for business investments.
• Family businesses, in an attempt to generate liquidity and minimize their estate tax liability, divert considerable amounts of money from growth and additional corporate and income tax revenue.
• The past, present, and expected future impact of estate taxes on jobs is substantial.
• Most estate tax revenue does not come from family business wealth. Family business assets make up a small fraction (one-seventh) of taxable estates.
• Exempting family business assets from estate taxes would reduce federal tax revenue by one-seventh of one percent, about $1.5 billion per year.

The issue of "paying" for tax cuts is frequently raised in the tax reform debate. In the case of estate taxes, it is prudent to ascertain the true cost of the revenue produced by the tax. Based on the findings presented in this study, a reasonable argument can be made that this revenue is not worth the costs - the costs of estate planning, the costs of collecting estate taxes, the lost jobs (and their corresponding income and payroll tax revenue) and the unrealized growth (with its corresponding corporate and income tax revenue).

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