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What’s the Real Story About Estate Taxes and American Farmers?

Published October 11, 2017 by Brady Cobin Law Group, PLLC

Taking a look at the data surrounding farms and the estate tax reveals a different picture than what is being presented.

During a visit to North Dakota, President Trump said he would eliminate the federal estate tax, saying it is a huge burden on small businesses and family farmers in that state and across the country.

“Tremendous burden for the family farmer, tremendous burden. We are not going to allow the death tax or the inheritance tax or the whatever-you-want-to-call-it to crush the American Dream,” Trump is quoted saying in a recent article in The Washington Post, “Trump called the estate tax a ‘tremendous burden’ on family farmers. Here’s the truth.”

According to the U.S. Department of Agriculture, just 0.4% or 153 farms out of 38,328 farm estates, paid any estate tax in 2016. If that is rounded to the nearest whole percent, it is zero. Under the estate tax, estates valued below $5.45 million don’t pay any estate tax or even need to file an estate tax return.

Most estates above the threshold don’t actually end up paying any estate taxes. The USDA says that 1.7% of farm estates were valued at more than $5.45 million, so they had to file an estate tax return. However, there are write-offs and other strategies like alternative land valuation methods, which result in less than a quarter of the estates that filed for the estate tax paying anything.

However, for a few small farms, the estate tax can create hardship. In 2016, the typical small family farm subject to the estate tax had to pay 11% of the value of the farm estate, or about $600,000. That’s like getting a tax bill that’s double your annual income.

These extreme cases drive opposition to the estate tax. A total of 48% of Americans responded that they’d like it to be repealed, according to a May 2017 Quinnipiac poll. However, these cases aren’t typical. In 2016, estate taxes on all farm estates brought in roughly $344 million in revenue, according to the USDA. That $344 million amounts to less than 2% of total annual estate tax revenue, estimated to be about $20 billion.

In actuality, exempting farm assets from the estate tax will not have a big impact on the Treasury Department and will only assist a few small family farms. While the federal estate tax is not popular, wealthy political donors who aren’t farmers are not likely to be motivated by this particular argument against it.

Reference: The Washington Post (September 7, 2017) “Trump called the estate tax a ‘tremendous burden’ on family farmers. Here’s the truth.”

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