President's Message | Federal Estate Tax Proposals Will Hurt Kentucky Farm FamiliesPosted on Sep 13, 2021
It’s hard to believe that fall is upon us and summer has passed by so quickly. It only seems like yesterday we were planning this growing season and now we’re in the middle of harvest. But, as farmers, isn’t that what we wait for and anticipate all year? Isn’t the expectation of a good harvest a contributing factor that continually keeps us on the farm?
Certainly, the ag economics side of the industry is what allows us to maintain sustainable operations. However, the tradition of farm life itself is what drives so many of us to come to or remain on the farm. The act of producing a crop year after year in soil that has been carefully nurtured for generations, often by the same family, is sometimes the only reason we keep doing what we do.
When watching all the young people show their animals and stand beside their agriculture displays at this year’s Kentucky State Fair, I couldn’t help but wonder how many of them will remain in the ag industry.
They are our future. If we expect to continue having the safest, most abundant, most affordable food supply in the world, it will be up to these young people to carry on the tradition. But it is up to those of us leading the industry now to ensure they have the ability to do so.
There are ways we can help make this happen, if only those who make our laws and write the governmental regulations we live by realize the importance of the next generation of farm families.
We are blessed to live in a state where our Congressional delegations get the agricultural way of life in Kentucky. We are fortunate to have General Assembly members, who, by and large, understand the importance of an industry worth nearly $6 billion a year in farmgate cash receipts.
The problem lies in some of the proposed federal legislation that could prove to be detrimental to those looking to inherit the family farm. First there have been many efforts to eliminate the estate or “death” tax. It has been introduced time and time again, but it can’t seem to get through both Congressional chambers and to the desk of a president who would sign it.
Most farms in this country are considered family farms. The estate tax has long been troublesome for many who inherited a farm after the death of a parent or family member who has passed the property on to that next generation.
Granted, farms do get an exemption that helps (to some degree) when dealing with the estate tax. However, there is the discussion of lowering the current estate tax exemption to a level that would be detrimental to many farm families. Lowering the exemption below current levels would cause an increased tax burden on many of the next generation looking to take over the farming operation after a death.
Though attempts have been made to abolish this tax or at least maintain favorable exemptions, the problem persists and leaves a gray cloud of doubt hanging over many young people wanting to continue their family farming tradition.
In addition to this issue comes the threat of a repeal of stepped-up basis. Current stepped-up basis law allows heirs to step up their cost basis in inherited property to match the value on the date of the previous owner’s death, meaning that only capital gains above that point could ever be subject to income taxes. Removing stepped-up basis would require the heir of the property to pay taxable gains based on the original purchase price of the farmland rather than the market value on the date of inheritance.
If you own a farm and have considered the possibility of handing it down to a child, you know how valuable this provision is. Without it, many farms would have to be sold due to such large capital gains tax debts that would be created without this provision, and we simply cannot afford to lose any more farmland all because of tax issues.
At some point we all must come to the realization that if the decline in farms and farm families continues, there will also come a time when we must depend on other countries to help feed our nation. Do we really want that to happen? Consumers already purchase millions of dollars’ worth of imported food annually out of want as opposed to need.
If we get to the point of needing to get our basic food supply from another country, we will be placing ourselves in a very precarious position. Food security is national security.
The young people who represent the next generation of farmers must be given the ability to carry on a family tradition or begin one all their own to guarantee our food supply. It’s as simple as that.
Make no mistake about it, farming is as tough a job as there is. There are so many factors to contend with. You’re at the mercy of Mother Nature, global market conditions, and ever-increasing output costs – not to mention so many misconceptions by a non-farming public.
But it is the most rewarding occupation I know of. There is no better feeling than to look out on a crop grown by faith and your own blood, sweat and tears, knowing it will be a bountiful harvest and knowing it is going to feed a world that so desperately needs it.
Adding a huge tax obstacle to an already challenging industry could prove to be detrimental in maintaining an industry that supplies our food, fuel, and fiber needs.
We simply can’t hang that burden on a young farm family. As much as a farmer needs a new crop each year, the people of this nation are depending on a new crop of farmers to feed them…whether they know it or not.