There is a scene in the first “Austin Powers” movie where the villain, Dr. Evil, who has been frozen for the last 30 years, squints his eyes, puts his pinky to his mouth and demands $1 million for not destroying the world.
That gag gets a lot of laughs, because everyone knows that $1 million isn’t nearly as much money as it was 30 years ago. After Evil’s assistants give him a lesson in inflation, he ups his demand.
Most of us would be thrilled to have $1 million; that’s still a lot of dough. But some farmers whose assets are worth $1 million or more know that they don’t, in fact, have that kind of money.
Their worth is tied up in land -- land that has inflated in value since they, or their parents or grandparents, bought it 30 or more years ago. If they live near an expanding metropolitan area, the land value may have increased even more because of intense competition by developers.
Even if farmers are millionaires in land value only, their heirs could be forced to pay estate taxes as if they were Bill Gates. The top estate tax rate will rise to 55 percent on a $1 million estate in 2011, unless Congress repeals the tax before then. If farm heirs don’t have that much cash or stocks lying around, they may have to sell at least some of their land or other assets to pay the tax. The result is fewer acres of farmland and more development.
The irony of the situation is that some of the same politicians who oppose killing the death tax for good also claim to be environmentalists and bemoan the loss of open space. As the kids say nowadays, “Hello!”
This scenario is playing out on a farm near Washington, D.C. -- one of the few that remain in the area. It soon will be turned into a huge development of homes, offices and stores. The heir to the farm has said the amount he has to pay in death taxes is one reason he is selling his land to a developer.
If the estate tax is aimed at breaking up rich estates and redistributing wealth, it’s failing miserably. A recent congressional report finds that estates worth more than $20 million actually pay less estate tax than those in the $2.5 million to $5 million range.
Most farmers have worked hard to build a successful farm, and they would like their kids and grandkids to keep it in agricultural production. With the death tax still on the books, that dream of keeping family farms going is less likely to become reality.
At the same time the government spends billions on conservation programs to protect the environment and wildlife habitat, it defeats its own goals by assessing a tax that induces landowners to sell to developers.It’s time for Congress to recommit to the goal of preserving farmland and consider how eliminating the unfair and unbeneficial death tax could support that goal.
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Lynne Finnerty is editor of Farm Bureau News, a publication of the American Farm Bureau Federation.
Focus is posted to AFBF’s web site at http://www.fb.org/views/focus/index.html
