September 15, 2000

‘Death Tax’
Elimination Act vetoed

President Clinton’s recent veto of a bill to phase out the federal estate tax (H.R. 8, the Death Tax Elimination Act of 2000) over a 10-year period—which has long been one of Farm Bureau’s top legislative priorities— was a major disappointment to the organization’s leaders and the farmers and ranchers it represents.

Texas Farm Bureau President Donald Patman of Waxahachie said,“We had asked the President to sign the bill. The ‘death tax’ is a significant barrier that stands in the way of passing family farms along to the next generation.”

Patman explained that farms and ranches are often worth significant amounts “on paper.” But in many cases, especially in recent years, there may not be enough cash on hand to pay a tax bill that can reach 55 percent of the value of the farm.

“Several consecutive years of low commodity prices and killer droughts have only worsened the situation,” Patman said. “There are not many farmers and ranchers today who can afford to shoulder that kind of tax burden.”

Due to cash flow problems, many of the heirs in a farm family can be forced to sell off part or all of a farming operation to pay the estate tax. Often, land developers are first in line with offers for the land. Not only is prime farmland lost in the process, but much wildlife habitat as well.

“Revenue collected from the ‘death tax’ is relatively insignificant, and we lose too much to justify it,” Patman said.

American Farm Bureau President Bob Stallman concurred, stating that the onerous death taxes can take away the livelihood of farm families and their employees.

“Death taxes also damage farm and ranch operations before death,” Stallman noted. “Families can spend thousands of dollars to try and protect their businesses by purchasing life insurance and paying attorneys to write estate plans. The money it takes for these activities is money that could better be used to update businesses and reduce debt.”

The bill would have reduced estate tax rates by about 15 percent over the next nine years and then ends death taxes altogether in 2010. Up to $5.6 million of family-owned assets would have been retained under the stepped-up basis in the proposal.

Passage of legislation to end the federal estate tax was possible because of grassroots pressure from farmers, ranchers and small businesses. Farm Bureau vows to continue fighting for its elimination.

“Enactment of this legislation is critical to the long-term health of American agriculture. Families operate 99 percent of our nation’s farms. Death taxes threaten their future by imposing taxes of between 37 and 55 percent,” said Stallman. “Targeted death tax relief hasn’t worked. The Family Business Estate Tax Exemption now in place is so complex that it can’t be understood and has so many strings attached that farmers who qualify are afraid to use it. It’s time to repeal death taxes.”

Republican House Speaker Dennis Hastert indicated that Congress was prepared to attempt an override of the President’s veto late last week.
Recognizing that H.R. 8’s passage in the House by a vote of 279-136 and 59-39 in the Senate were both shy of the two-thirds needed, Farm Bureau immediately mounted an effort to sway enough additional members of Congress to succeed in overriding the veto.