U.S. Sen. John Thune (R-S.D.) today at a hearing before the Senate Finance Committee questioned U.S. Department of Treasury Secretary Jack Lew about the Obama administration’s proposal to institute a second death tax on South Dakota family farms and businesses. Thune offered an example of how the administration’s capital gains proposal will negatively impact family farms in South Dakota and called on the secretary to explain the intent behind their capital gains proposal.
Video of Thune’s questions can be viewed here.
Impact on South Dakota Farmers and Ranchers:
“[The administration’s] proposal, if enacted, would have a devastating impact on family farms and small businesses in my state of South Dakota. I want to give you an example… if you take a typical family farm that bought…640 acres back in 2000 for $640,000, which…in South Dakota that would be considered a small farm. Today that same farmland is probably worth somewhere between $3.5 million and $4.5 million, depending on where it’s located.
“So under the current estate tax law, which excludes assets up to $5.43 million, the family farm isn’t taxed when it passes from one generation to the next. Now under the administration’s proposal, this family farm would be hit with a significant tax when the family farm is transferred to the next generation of family members. …so in that example this South Dakota family would suddenly find themselves facing a tax bill of $1 million or more.”
Administration’s Intent Behind Capital Gains Proposal:
“…most farms of this size would not have the liquid assets to deal with that large of a tax bill, meaning the only way they would be able to pay Uncle Sam would be to break up the family farm and sell off portions of it…What is the administration’s intent with regard to this tax? If it is to break up family farms, obviously it is going to have that effect, or is it simply an unintended consequence of your interest in imposing yet another layer of taxation at death?”