Buying the Farm and Paying the Taxes

Click for audio Buying the Farm and Paying the Taxes

Benjamin Franklin once said that death and taxes are the two certainties of life. The Michigan families who are forced to sell off their farms just to pay the onerous federal estate tax would certainly agree.

The estate tax is often called the "death tax" because it’s levied on a citizen’s entire estate at the time of his death. In 1916, when the tax began, it applied a 10 percent top rate to estates worth today’s equivalent of $720,000.

Currently, the death tax gobbles up as much as 55 percent of the family fortune and is applied to estates with values as low as $600,000.

Many family farms are especially hit hard because farmers typically reinvest their profits into buildings and equipment, quickly pushing their estates’ values over the death tax threshold.

A family trying to hold on to a $600,000 farm is pounded with a $193,000 tax bill, which they can often pay only by selling the land to developers.

The federal estate tax shatters Michigan’s tradition of family owned farms and contributes to the loss of prime cropland. The sooner Congress kills the confiscatory death tax, the better.

For the Mackinac Center, this is Catherine Martin.