By Pettus L. Read – Director of Communications for Tennessee Farm Bureau
“The death tax does nothing but punish small businessmen and farmers building for the next generation. Unlike Washington, Tennessee plans for the future. I look forward to making sure the death tax meets the reaper,” were the comments of Lt. Gov. Ron Ramsey after House Bill 3760 passed the House Finance, Ways and Means subcommittee recently and headed for the full committee. The bill increases the maximum allowable inheritance tax exemption from $1 million to $1.25 million with plans to increase the exemption more in coming years. During Ag Day on the Hill held March 20, farmers and legislators alike could be seen walking the Capitol halls wearing large red buttons declaring death to the unfair tax. For years the agricultural community has been trying to put the tax out of its misery in Washington with no luck, but things look different for its cousin here in the Volunteer State. With major support from elected officials and the governor, the tax may be moving its way to operating for a short while only on life support.
Tennessee is one of only two states in the South that imposes a “death tax”, and not a single state in the Sun Belt has the tax as well. The tax can hit farmers disproportionately hard one report says and if you are a farmer trying to pass a farm on to the next generation, an unfair state tax is the last thing you need.
So many times death slips up on us and we die thinking that what we have worked so hard for will belong to our heirs. Yes, our farmers plan for the final in the way they know best. They have a will, which everyone with property should have. They have health insurance to take care of their medical costs. And, many even have pre-planned their funerals, taking care of all the costs and what was to be said at that final hour.
However, there was one thing that may not have been planned on. It was something that some time should have been taken to plan for, but just like most things when dealing with the government, the realization of the farmer’s net worth was different from the government’s. The thing many get caught on in their planning is the inheritance taxes.
Often, the farmer never realizes what his property, equipment, livestock, company stocks, and other financial holdings were worth. They had no idea that what they owned was valued in the millions, rather than the thousands as they thought.
Due to the farm value being more than the exempted value, the children of the farmer are required to pay enormous amounts of estate taxes. To pay these taxes, the children have to sell the farm their farmer father loved so much. They don’t want to, but it may be the only way they have to pay what the government demands.
“I already paid for it once. And I already pay taxes on it every year to keep it,” Mark Klepper, Greene County farmer and former state Tennessee Farm Bureau Young Farmer of the Year winner told reporter Andrea Zelinski as he visited his state representative at the Capitol wearing one of the “Death Tax” buttons. “You work hard all your life to make the money, you get taxed on it while you make it, you get taxed on it to keep it and the interest you make of it. And then when you die, your children have to pay tax on it just to keep it again,” he said. “It’s not fair for the person who actually works to achieve wealth to get punished for working.”
We need to take this opportunity and make something happen this year. Because 84 percent of farm assets are real estate-based, farm families can be hit a lot harder than many other small business owners when estate taxes are enforced following a property owner’s death. If the family has to sell the land, buildings and equipment to pay the taxes due to not enough cash on hand to keep the operation going, then everyone loses. When the farm disappears, so does business for the shop owners who sell feed, seed and fertilizer. The community loses another family, along with their involvement.
The estate tax is just as I labeled it, a “death tax,” because it has the ability to kill farms, communities and future dreams. It is time to bury it for good.
*Pettus L. Read is Director of Communications for the Tennessee Farm Bureau Federation. He may be contacted by e-mail at firstname.lastname@example.org