How The Death Tax Increase In 2013 Will Destroy Small Businesses And Family Farms

November 25, 2012 1:15 pmViews: 491

You have all probably heard about the fiscal cliff looming at the beginning  of 2013 which will bring devastating taxes to everyone across the board in this country. But one thing you may not know is the huge impact that these tax increases will have on small business and especially family farms.

Small businesses are the bread basket of job creation in the country and if they are hit with increased death taxes or as they are called by the IRS estate taxes, it could be the end for many of these companies. Family farms and the farmers that run them stand to be the hardest hit because of their high worth but relatively low profit potential. Family farms may own large tracts of land making their businesses highly valuable and of course, subject to high taxes when passed on in someones estate.

The bottom line is this. The looming fiscal cliff will raise the estate tax from 35% after the fist $5 million in assets to 55% after the first $1 million in business assets. Did you get that? Not only does the rate go from 35% to 55%, the exemption goes from $5 million to a measly $1 million. When a family farm owns several hundred to a few thousand acres it doesn't take much to make it worth more than $1 million. And since many of these farms have a profit margin not at all equal with their net worth, a huge tax bill of say some $2.6 million on a farm that is only worth $6 million and only produces an income of $100,000 a year for the family, would be devastating.

Here's what TheEconomicCollapseBlog.com has to say about it:

If you have a farm or a small business, would you like to pass it on to your children when you die?  Well, unless Congress does something, it is going to become much, much harder to do that starting next year.  Right now, there is a 5 million dollar estate tax exemption and anything above that is taxed at 35 percent.  But on January 1st, the exemption will go down to 1 million dollars and the tax rate will go up to 55 percent.

A lot of liberals are very excited about this, because they believe that the government will be soaking wealthy people like Warren Buffett and Bill Gates.  But the truth is that a lot of farms, ranches and small businesses will be absolutely devastated by this change in the tax law.  There are many farmers and ranchers out there today that do not make much money but are sitting on tracts of land that are worth millions of dollars.  According to the American Farm Bureau, approximately 97 percent of all farms and ranches in the United States would be subject to the estate tax if the exemption was reduced to just a million dollars.  That means that the children of these farmers and ranchers would be faced with a very cruel choice when it is time to inherit these farms and ranches.  Either they come up with enough money to pay the government about half of what the farm or ranch is worth, or they sell the farm or ranch that may have been in their family for generations.

Needless to say, most farm and ranch families do not have that kind of cash lying around.  Most of them are just barely making it from year to year.  So this change in the tax law is going to greatly accelerate the death of the family farm in America.  This is also going to devastate many family-owned small businesses.  Many small businesses don't make much money, but they have buildings or land or assets worth millions of dollars.  Children that may have wanted to continue the family legacy will be forced to sell because of the massive tax bill that they get from Uncle Sam.  This is an insidious cruelty, and it shows just how broken our system has become.

The desire to leave the wealth that you have worked so hard to accumulate all your life to your children is something that is common to virtually all human societies.  We want to know that future generations will be taken care of.

It is simply immoral for the federal government to swoop in and tax farms, ranches and small businesses that were intended to be passed down from parents to their children at a 55 percent tax rate.

Such is the criminal ways of our federal government.

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