Pay And Repay Through The Nose: The Impact Of The "Death Tax"
At Fox, William La Jeunesse writes that ranchers and farmers will be hard-hit by the "death tax," the tax heirs have to pay on a person's estate after he dies:
Rancher Kevin Kester works dawn to dusk, drives a 12-year-old pick-up truck and earns less than a typical bureaucrat in Washington D.C., yet the federal government considers him rich enough to pay the estate tax -- also known as the "death tax."And with that tax set to soar at the beginning of 2013 without some kind of intervention from Congress, farmers and ranchers like Kester are waiting anxiously.
"There is no way financially my kids can pay what the IRS is going to demand from them nine months after death and keep this ranch intact for their generation and future generations," said Kester, of the Bear Valley Ranch in Central California.
Two decades ago, Kester paid the IRS $2 million when he inherited a 22,000-acre cattle ranch from his grandfather. Come January, the tax burden on his children will be more than $13 million.
For supporters of a high estate tax, which is imposed on somebody's estate after death, Kester is the kind of person they rarely mention. He doesn't own a mansion. He's not the CEO of a multi-national. But because of his line of work, he owns a lot of property that would be subject to a lot of tax.
..."For everyone to have to re-purchase the ranch or farm over and over for each generation, that's inherently unjust. So what we're doing is asking our politicians to understand that and repeal the estate tax."
...Currently, the federal government taxes estates worth $5 million dollars and up at 35 percent. When the Bush-era tax rates expire in January, rates increase to 55 percent on estates of $1 million or more. While some Republicans want to eliminate the death tax entirely, President Obama has proposed a 45 percent rate on estates of $3.5 million and up.
Calling this a tax is way too polite. It's theft, with a government stamp on it.
In tangible terms, this is like building a house and then dying and having the government come tear off the roof and keep it. Your wife and kids will get rained on unless they have the money to bribe the government to leave the roof on. (We call this "paying taxes" -- much more genteel).
I grew up in a rural area. A couple of friends from high school whose families were farmers ended up struggling to pay this death "tax." It took them years to pay it off.
A couple of others just gave up and sold the farm to pay the tax - farming for several generations killed off by the government.
So often one has to ask - what the hell did we have a revolution for?
Charles at November 20, 2012 5:57 AM
Those damned rich people. Owning property? What are they thinking?
A nation of propertyless people, who wish to be told what to do and who clamor for government to take things and give it to them, is easiest to rule.
Radwaste at November 20, 2012 6:01 AM
A nation of propertyless people, who wish to be told what to do and who clamor for government to take things and give it to them, is easiest to rule.
Yeah, right up until you have nothing to give them because you've run out of other people's money. There's a saying when you have a tiger by the tail, you best not ever let go.
I R A Darth Aggie at November 20, 2012 6:25 AM
"A couple of others just gave up and sold the farm to pay the tax - farming for several generations killed off by the government."
The irony is that the people who complain about "suburban sprawl" are the same people who support high estate taxes -- which cause heirs of rural property to have to sell it off to developers in order to pay the taxes. The extent to which this drove the housing bubble is very underestimated.
Cousin Dave at November 20, 2012 6:34 AM
"Currently, the federal government taxes estates worth $5 million dollars and up at 35 percent"
I may be wrong, but don't you only pay tax on the amount that EXCEEDS 5 million. In other words the first 5 million is free.
A pretty reasonable amount to be able to pass on to the next generation without incurring taxes.
justsomeguy at November 20, 2012 9:40 AM
The fed and the IRS have been screwing around with exemptions and different rates for years now.
Smart people form a trust or a corporation and organize their businesses to avoid these issues.
Isab at November 20, 2012 12:40 PM
Justsomeguy,
I think you need to read the rest of that paragraph. Such as "When the Bush-era tax rates expire in January, rates increase to 55 percent on estates of $1 million or more."
The property alone can be worth that much, and then there is all the farm equipment, which ain't cheap.
For many, the only way to raise the money to pay such taxes is to sell the land - the very thing from which they earn a living.
Further, many feel (myself included) that the government should NOT be taxing this stuff at all.
Charles at November 20, 2012 1:08 PM
That barely covers a house in some areas. And, if purchased long enough ago, it could be the house in which the heirs grew up.
Why does the Left believe it morally wrong to leave your wealth to your offspring?
Especially those on the Left who inherited their wealth (that's right, I'm lookin' at you, Kennedys).
I think too much of the Left is made up of the kids who looked on in angry jealousy as other kids brought cool toys to school; toys their parents couldn't afford. And, instead of making friends with those kids, they marinated themselves in their hatred and nursed revenge fantasies.
Guys, get over it.
Conan the Grammarian at November 20, 2012 1:41 PM
Trusts and corporations actually have higher tax rates then individuals.....
ParatrooperJJ at November 20, 2012 1:47 PM
You read that wrong as Conan noted above. But even if you had read it write -- this is the same flawed argument Buffet uses about capital gains taxes.
When you, or your family, bought the property they were taxed on it. Then usually there are annual property taxes on it. If it is a farm or other industrial property, the income that was produced from it was also taxed.
Add in that if this is the third or more generation that the property it was taxed again when it was sold or inherited by the family members. From a quick glance[1], an acre of farmland in Iowa cost $218 in 1950. The price per acre in 2011 was $6,708 per acre. So the farmer that bought a 1000 acres in 1950 and passed it on is sitting on $6.7 million now price now. But the family is still only making farm income and is as still subject to weather, and has to act as a small business owner and save for retirement.
At what point is property taxed enough?
[1] www.iowaworkforce.org/trends/farmhist.html
Jim P. at November 20, 2012 2:47 PM
@ParatrooperJJ,
Trusts and Corporations do not necessarily have higher tax rates than individuals. It really depends on the type of business and how it it organized. An LLC can be a very effective way to organize a family business, and evade inheritance taxes, that an individual business owner would be subject to.
Isab at November 20, 2012 3:18 PM
justsomeguy "A pretty reasonable amount to be able to pass on to the next generation without incurring taxes."
Ha ha .. so now there is such a thing as a "reasonable" amount of money to steal. Really. How dare these folks complain about being robbed, after all, the robbers are only demanding a "reasonable" amount.
The income tax is also robbery, this is just another form of robbery. Until society figures out that robbery is wrong, and puts robbers in jail where they belong, we'll keep dealing with new variations of the same problem.
(I wonder if one could work around this by selling your property to your children before you die for well less than it's worth ... I know very little about it.)
"Why does the Left believe it morally wrong to leave your wealth to your offspring?"
Because they are thieves and just can't resist grabbing everything they can get their filthy hands on. What should happen in a just society is that thieves should be sent to jail.
Lobster at November 20, 2012 5:12 PM
That is where the Gift Tax and the Estate Tax Clawback comes in.
So that is why many family farmers do incorporate, but it has issues of it's own especially in the light of Obamacare, right-to-work states and other similar issues.
Jim P. at November 20, 2012 7:58 PM
Any idea what Warren Buffet is doing with his money? After all, he supports high estate taxes. One of his sons is supposedly his heir at Berkshire Hathway, but being top boss at the company is not going to net him billions especially for the billions to count as personal wealth. Is Warren doing something to make sure that his particular category of wealth does not fall into the category of estate taxes?
Redrajesh at November 21, 2012 8:33 AM
Warren Buffett's children aren't deprived.
http://www.vanityfair.com/online/daily/2009/10/when-journalists-write-about-the
Conan the Grammarian at November 21, 2012 8:59 AM
"Any idea what Warren Buffet is doing with his money? "
Last I heard, he was investing in lobbyists to get government subsidies for the wind farms that he owns.
Cousin Dave at November 21, 2012 2:44 PM
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