Legislation in Congress to eliminate ‘death tax’ would work to preserve family farms

Farming is a costly way of life, and death can be costly when surviving family members are hit with estate taxes on the transfer of farmland and equipment.

With financial assets tied up in cropland, buildings and machinery, farm families often have few options to generate funds to pay an estate tax bill. When those taxes exceed cash and other liquid assets, surviving family partners may be forced to sell property in order to keep the farm going. This further compounds farm bankruptcy and loss of farmland to development pressure.

The federal Tax Cuts and Jobs Act of 2017 was a big relief, as it included an exemption that requires an estate to file and pay taxes only when gross assets exceed $11.58 million per person. But this legislation will expire in 2025, dropping the exemption to $5.8 million in 2026.

American Farm Bureau Federation supports the Death Tax Repeal Act of 2021—H.R. 1712 and S. 617—that would repeal the estate tax or make the current $11.6 million exemption permanent. AFBF leadership said expiration of the exemption would be devastating to the continuity of America’s farms, impacting 10% of farms or 65% of farmland.

Virginia’s agricultural advocates are encouraging farmers to ask their congressional leaders to support the legislation.

“As President John F. Kennedy said, ‘The farmer is the only man in our economy who buys everything at retail, sells everything at wholesale, and pays the freight both ways,’” quoted Ben Rowe, national affairs coordinator for Virginia Farm Bureau Federation. “Farmers lack the ability to control the pricing of the goods they buy and sell, and shouldn’t have to face the additional financial burden of heavy taxation on the generational transfer of farmland and equipment.”

Blacksburg farmer Scott Sink, who serves as VFBF vice president, said the complexities of generational property transfer are burdensome to farm families and small businesses. The estate tax repeal would simplify that.

“I feel this legislation will help small businesses and family farms with continuity and planning as they move forward,” Sink said. With profit margins already tight, “having estate taxes resolved is one less burden families and small businesses have to face.”

A recent study by the U.S. Department of Agriculture’s Economic Research Service said 98% of the nation’s 2 million farms are family farm operations. And of those, more than 74,000 family farmers were operating 2,000 or more acres in 2017, suggesting that approximately 3.6% of the 2 million family farms could have farm assets that exceed the estate tax exemption.

These 74,000 farms comprise more than 449 million acres, indicating that nearly 50% of the farmland in the U.S. could face increased liquidation pressure upon the transfer of assets at death.

“We look forward to working with the Virginia delegation to get this important legislation passed,” Rowe said. “The federal tax code should encourage farm business growth, rather than add to that uncertainty. Eliminating the estate tax removes another barrier to carry on our agricultural legacy and make farming more accessible to all.”