In Washington, There’s a Tax for Every Occasion

By Sen. John Thune
October 20, 2017

Death should not be a taxable event. Surprisingly, though, the idea that it would be such an occasion has become a political issue that can pit family-run farms and ranches against Washington’s political elite who think certain Americans, including some farm and ranch owners, should be taxed two or three times on their wealth. I simply disagree.

I don’t need to tell the hard-working farm and ranch families across South Dakota that they’re in a land-rich and cash-poor business. They know the assets on the business’ balance sheet far exceed the earnings that end up in the family checkbook. But for too many lawmakers in Washington, they just don’t seem to care.

The case against the death tax, which can hit families at the worst possible moment, is pretty straightforward. As everyone knows, an individual’s wages are taxed when they are earned. Interest, dividends, and capital gains from wages that are saved are then taxed again. When the owner of those assets passes away, the death tax can hit his or her earnings yet again – for a second or third time. It’s this extra assessment on previously taxed assets that folks, myself included, find so objectionable.

Wealth isn’t only measured by the amount of money a person has in his or her bank account. It’s also measured by non-liquid assets, like land or other property. That can spell trouble for a land-rich South Dakota family-run farm or ranch if the death-tax collector shows up at the door, particularly now, after the U.S. Department of Agriculture says cropland values have increased by 400 percent over the last 15 years. Remember, growth in land value doesn’t always translate into growth in cash from those assets.

For supporters of the death tax, their favorite talking point is that it hits a small number of family-owned businesses, farms, and ranches each year, as if that somehow justifies a confiscatory tax on a larger swath of Americans. What they conveniently fail to mention is the large expense – both in time and money – that farmers and ranchers invest during their lives to avoid being a death tax statistic. Too often, these folks have to hire costly lawyers, accountants, and estate planners, all of which can cost well over one hundred thousand dollars, to develop an effective estate plan. They can also spend tens of thousands of dollars each year in life insurance premiums – again, all just to avoid being a victim of the death tax.

Don’t take my word for it, though. A South Dakota rancher and estate planner recently wrote, “My brothers and I own an 8,000-head cattle feeding and finishing operation that will be threatened by the death tax if nothing changes … Repeal of the death tax means farmers, ranchers, and small business owners like me can stop wasting money on a tax that threatens our family’s future. That extra money can be spent more wisely in our local economy, which helps our community grow through increased jobs, wages, and purchasing.”

I get it. Many of my Democrat colleagues who support the death tax see it as an opportunity to raise revenue and spend it on other federal programs. They don’t think many farmers and ranchers pay the death tax, and for those who are fortunate enough avoid it, the tens of thousands of dollars they shell out to do so are just a mere inconvenience. In effect, they are punishing success by demanding another big tax at death. To those lawmakers, I’d say you need to meet more farmers and ranchers.

In my opinion, one family-run operation that’s forced to sell because of the death tax is one too many. Now is the time to bury the death tax once and for all, and I’ll continue my years-long fight to do so in the tax reform bill I’m working on in the Senate.

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