House members on Thursday voted 240-179 to repeal the estate tax, a tax that some ag groups say unfairly hurts farm businesses.
The tax, also called the "death tax" by some groups and legislators, imposes taxes of up to 40% on some estates. Ag groups argue this hurts capital-intensive family farms, and effectively penalizes the transfer of family farms from one operator to the next.
The National Cattlemen's Beef Association said the American Taxpayer Relief Act, passed at the end of 2012, narrowly avoided return to a $1 million estate tax exemption with a 55% tax rate.
ATRA legislation also provided a permanent exemption of the estate tax of $5 million per individual, $10 million per couple, and raised the top tax rate to 40%. While NCBA said ATRA provided some relief for some farmers and ranchers, the group suggested that a permanent fix is necessary.
"With rising farm land values across America the estate tax will continue to plague farm and ranch families until it is repealed," the group said.
A similar bill to repeal the "death tax" also has been introduced in the Senate by John Thune, R-S.D.
But the White House has previously threatened to veto estate tax repeal legislation, favoring tax cuts that focus on education or lower-income Americans. Other opponents of the bill suggest the revenue it eliminates – nearly $269 billion over 10 years, according to the Joint Committee on Taxation – is a drawback.
Still, farm groups say the estate tax repeal bill is a good step forward in ensuring family farms can be passed on.
"When younger farmers inherit farms, they are often asset rich and cash poor. The estate tax can hit them with a bill to the IRS that is prohibitively costly," explained President and CEO of the National Milk Producers Federation, Jim Mulhern. "This legislation helps address that problem, and will facilitate the ability of established farmers to transfer their businesses to their offspring."
The bill passed Thursday also repeals the generation-skipping transfer taxes and makes permanent the maximum 35% gift tax rate and lifetime gift tax exemption. It also provides for an inflation adjustment to such exemption amount, which Mulhern said will "provide more certainty to the agriculture sector, and protect farms' financial viability for future generations."
Bob Stallman, president of the the American Farm Bureau, agreed: "We need tax policies that help capital-intensive businesses like farms and ranches, and that don't stand in the way of sons and daughters ready to follow the agricultural legacy of their parents," he said.