THE "PARIS HILTON" TAX

Few Wealthy Farmers Owe Estate Taxes, Report Says
By DAVID CAY JOHNSTON
July 10, 2005
NY Times

The number of farms on which estate tax is owed when the owners die has fallen by 82 percent since 2000, to just 300 farms, as Congress has more than doubled the threshold at which the tax applies, the Congressional Budget Office said in a report released last week.

All but 27 farmers left enough liquid assets to pay taxes owed, the budget office found, although it hinted that the actual number might be zero. The study examined how much in cash, stocks and bonds these farmers left to pay estate taxes, but the report noted that no data existed on how much life insurance the farmers had put into trusts. Virtually all wealthy farmers own life insurance in trusts, say estate tax lawyers who specialize in working with farmers.

President Bush, the American Farm Bureau Federation and the National Cattlemen's Beef Association have asserted that the estate tax is destroying family farms. None, however, have cited a case of a farm lost to estate taxes, although in June 2001 Mr. Bush said he had talked to such farmers.

The number of farms subject to the estate tax, always a minority, has fallen because Mr. Bush persuaded Congress to raise the threshold for estate taxes to $1.5 million, double that for married couples, for last year and this year. With simple planning, couples with children can shield several million more dollars from the tax.

In 2000, when the threshold was $675,000, taxes were owed by 1,659 farm estates, the study found. Had the current threshold been in effect, only 300 farms would have owed any tax.
Next year, when the threshold rises to $2 million per person, just 123 farms will be subject to the estate tax, the study found. And in 2009, when it rises to $3.5 million, only 65 of the nation's 2.2 million farms will be affected, the study said.

Neil E. Harl, an economics professor at Iowa State University whose expertise in estate tax planning for farmers has made him a household name in the grain belt, said many Americans had a false impression that the estate tax was destroying family farming. He said the Congressional study "adds to the weight of the evidence that this is a myth that has been well spun." "Farms, in particular," Mr. Harl said, "are not in jeopardy because of estate taxes."

Michael J. Graetz, a professor at Yale Law School who was a tax policy official in the administration of President George Bush, said repeal was primarily a benefit to people with large estates held in stocks and other securities, not to farmers.