Earlier this spring, Republican Senator John Thune of South Dakota led 40 other senators in reintroducing legislation to permanently repeal the Federal Estate Tax, also called the Death Tax. Thune says the Death Tax unfairly affects farmers and ranchers as they try to pass on the family operation.
Thune; “I would say family-owned farms and ranches often bear the brunt of the tax, which often make it difficult and costly to pass these businesses down to future generations. If anything in rural America in places like south Dakota, we want to make it possible for that family farm to stay in the family.”
Thune has long been a supporter of efforts to repeal the Death Tax. “The Tax Cuts and Jobs Act that I was involved with negotiating back in 2017, doubled the individual estate and gift tax exclusion at the time and then adjusted it through inflation through 2025. But, under the tax cuts and jobs act that increase is only temporary, all these things expire in 2025 and snap back to the earlier level. So, unless that increased exclusion is extended or the tax is completely repealed by 2026 the exclusion amount would revert to its pre-2018 level, and that starts capturing a whole bunch more farmers and ranchers.”
According to Senator Thune, the costs on business owners from the Death Tax are substantial and burdensome. Thune; “But if we can’t at least get this temporary exemption level extended here in a couple of years it’s going to increase dramatically the uncertainty and the planning costs that family-owned businesses, farms and ranches have to deal with. And that in and of itself is a huge burden, there’s a study out there by the tax foundation that estimates the compliance costs associated just with complying with the death tax amount to about 18 billion dollars annually.”
Because of the financial realities of agriculture, it can be difficult for farmers and ranchers to pass on those businesses to the next generation. Thune; “It allows the federal government really to claim up to 40 percent of a taxable estate, and your liquid assets in other words the cash that a farmer might have available isn’t likely to come close to covering the tax bill from the federal government. So, the only thing that ends up being left is for the children to start selling off farm equipment and land. In some cases, they might be able to keep the farm but a smaller piece of it, in others they may have to sell off the farm entirely. The same thing can happen to other family-owned businesses.”
Story provided by NAFB News Service and Brett McRae Northern Ag Network, Billings, Montana