Last week I introduced a bill to permanently repeal the death tax. I’ve been pushing to repeal the death tax for a long time, because I’ve seen the consequences the tax can have for family farms and ranches and for family businesses. I’m proud that we protected a lot of family farms and businesses three years ago with the Tax Cuts and Jobs Act by doubling the death tax exemption, but the death tax is still a big problem.
First, the change we made to the death tax in the Tax Cuts and Jobs Act isn’t permanent – the increased exemption level expires at the end of 2025. Second, Democrats – always eager to seize any possible revenue source – have proposed not merely returning the exemption to its previous level, but reducing it even further. That would be a big problem for a lot of family farms and businesses.
Every American, of course, has an obligation to pay what he or she owes in taxes, but there should be a limit to how many times the government can tax you. Death should not be a taxable event. The money you leave at your death has already been taxed by the government at least once, which makes the death tax double taxation.
People who support the death tax tend to talk as if the death tax only affects the fabulously wealthy, which isn’t the case. Small and medium-sized businesses, family farms, and ranches spend a lot of time and money on estate planning to avoid being hit by this tax. Farmers and ranchers in my state know that without careful – and costly – planning, the federal government can come around after their death demanding a staggering 40 percent of their taxable estate, and their children won’t have the money to pay without risking the farm or ranch.
Why? Well, farming and ranching is often a cash-poor business. A farmer might technically be worth several million dollars, but the vast majority of that is land and farming equipment, and only a small fraction of it is money in the bank. The Farm Bureau reports that over the past 10 years the value of farmland has increased by nearly 50 percent. It’s completely possible that a farmer’s land might have substantially increased in value over the past decade while his income has barely increased at all. In fact, it’s perfectly possible that in a bad year, a farmer with several million dollars’ worth of land might barely break even income-wise.
So what happens when a farmer dies? Well, the federal government will claim up to 40 percent of his taxable estate. But his liquid assets – in other words, the cash he has available – will likely not come close to covering the tax bill from the federal government. And so the only thing left for his children to do will be to start selling off farm equipment and land. In some cases they will be able to keep the farm – just a smaller version of it. In others, they may have to sell off the family farm entirely.
On top of all this, the death tax is an inefficient tax that raises a very small amount of revenue – while placing a very large burden on farmers and ranchers and small businessmen and women.
Repealing the death tax is an idea that has won bipartisan support in the past – including support from more than one sitting Democrat senator. I hope it will win bipartisan support in this Congress as well, and I will continue to fight to ensure that no family farm or business has to worry about this punishing tax.
I’ve said it before, and I’ll say it again: One family farm or business lost to the death tax is one too many.