national sales tax

[jgruber]

Family farms just don't seem to be able to stand up to the competition of corporate farms the size of Rhode Island.

That tells me that the powers that be do not want family farms to survive.

[buster]

Assuming I was right with the $1 million figure (actually, the exact amount doesn't matter for this question), didn't/doesn't the tax apply only to the value above that amount anyway?

[Bisquick]

I don't know that its a matter of the powers that be as much as a matter of economies of scale and technological progress.

One man can cover 10 or 100 times as many acres as our ancestors could 100 years ago.

You can negotiate better seed contracts and chemicals with more acreage.  You can keep buying more land with more free cash flow (its not like stock, you can't buy 1 or 2 acres at a time, you have to buy 30, 60, 90 or more acres at a time).  You can keep maintenance people on staff.  You can keep your equipment running more and in the barn less.  If you buy enough equipment from a manufacturer, you even start getting free "tester" equipment to use from them from time to time!

The only thing really, really shafting small farmers was the estate tax, but that is/was satisfactory now.

[jgruber]

Perhaps, but if the powers that be wanted the family farm to survive, it would.

I don't know that its a matter of the powers that be as much as a matter of economies of scale and technological progress.

One man can cover 10 or 100 times as many acres as our ancestors could 100 years ago.

You can negotiate better seed contracts and chemicals with more acreage.  You can keep buying more land with more free cash flow (its not like stock, you can't buy 1 or 2 acres at a time, you have to buy 30, 60, 90 or more acres at a time).  You can keep maintenance people on staff.  You can keep your equipment running more and in the barn less.  If you buy enough equipment from a manufacturer, you even start getting free "tester" equipment to use from them from time to time!

The only thing really, really shafting small farmers was the estate tax, but that is/was satisfactory now.

[Bisquick]

It is the amount above.  I'm not complaining about the current level.  I'm complaining if someone doesn't make the current level permanent or decides to repeal it.  Clinton or whoever passed the did a fair job.

[buster]

I think most people would agree that a working family farm shouldn't be unduly burdened by the estate tax. But at some point, isn't a huge farm no longer a "family farm"?

[Coregram]

The tax applies to the value of the estate over the threshold (1.5 million now, 2 million in 2006, back to $600K in 2011 due to sunset.)  The threshold does get reduced by gifts made while you are alive.

It's not that hard to get over the limit in many parts of the country, especially with a home.  And closely-held "small business" face the same problem as the farms.  Often, the survivors have to sell the business or farm to pay the taxes (up to 48% rate) since the taxes must be paid in cash, but the assets in the estate aren't in liquid cash unless sold.

And alot of what is taxed in the estate tax has already been taxed through income taxes while you were living.  Income from closely held businesses that is reinvested, the after-tax payments made on a mortgage, the cost of investments purchased, all are already taxed.

[buster]

It's not that hard to get over the limit in many parts of the country, especially with a home.  And closely-held "small business" face the same problem as the farms.  Often, the survivors have to sell the business or farm to pay the taxes (up to 48% rate) since the taxes must be paid in cash, but the assets in the estate aren't in liquid cash unless sold.

I feel that small businesses should not be unduly burdened just as family farms should not. But does anyone know of any numbers regarding the phenomenon of farms/businesses being lost or sold because of the burdens of the estate tax?

And alot of what is taxed in the estate tax has already been taxed through income taxes while you were living.  Income from closely held businesses that is reinvested, the after-tax payments made on a mortgage, the cost of investments purchased, all are already taxed.

But the person now receiving the income has not paid taxes on it.

[egg]

It's not that hard to get over the limit in many parts of the country, especially with a home.  And closely-held "small business" face the same problem as the farms.  Often, the survivors have to sell the business or farm to pay the taxes (up to 48% rate) since the taxes must be paid in cash, but the assets in the estate aren't in liquid cash unless sold.

Only 3% of Americans with farm assets pay any form of estate tax (from Estate Tax Returns Filed in 1999, one of the public use IRS databases). Further, less than 7% of Americans paying the estate tax even have any farm assets, so a heavy-handed repeal of all estate taxes in order to address the plight of a small group of farmers seems unneccessary when modifications to the existing taxes will do. In fact, provisions in the Taxpayer Relief Act of 1997 provided most of the modifications necessary to keep most farms and small businesses out of the estate tax. For example, exemptions of up to several million dollars can be claimed (driven by land use exemptions, and- I believe- each spouse may claim a $675,000 deduction).

So I certainly agree with you that it is bad when farms (and small businesses) are demolished by estate taxes, but there just isn't much to suggest that it actually happens very often. In fact, data suggest exactly the opposite.

And alot of what is taxed in the estate tax has already been taxed through income taxes while you were living.  Income from closely held businesses that is reinvested, the after-tax payments made on a mortgage, the cost of investments purchased, all are already taxed.

The single largest proportion of all estate tax revenue comes from unrealized capital gains (vs. the elements named above); the larger taxed estates are overwhelmingly comprised of these [[edit: UCG comprise 37% of estates >$1mil and 56% of estates >$10mil... see Poterba and Weisbrenner, "The Distributional Burden of Taxing Estates and Unrealized Capital Gains at the Time of Death"]]. Unrealized capital gains are not taxed, of course, and the repeal of the federal and state estate taxes means only that this wealth will never be taxed (the realizing inheritor will pay taxes only on gains of the gift since inheritance).

Of course, some part of the estate tax is double-taxation (perhaps like sales tax is double-taxation), and you've cited a few of the sources. But given that the largest proportion of estate tax revenue has never been taxed, I think it is a little misleading to characterize it as primarily "double-dipping" (as they say). There simply was no first tax on a good proportion of the estates in question.