Senators Blanche Lincoln, D-Ark., and Jon Kyl, R-Ariz., have introduced an estate tax proposal that they want to attach to a small-business lending bill that is awaiting Senate action. Their proposal would provide for a $5 million exemption per person with an index for inflation and gradually drop the top tax rate to 35%.
Currently the estate tax has been zeroed out over the past nine years, but without action in Congress on Jan. 1, 2011 the estate tax will revert back to pre-2001 levels of a $1 million exemption and tax rate of 55%.
An estate tax bill was passed by the House last year that would set the exemption at $3.5 million and the rate at 45%.
National Farmers Union Vice President of Governmental Relations Chandler Goule says that NFU is pleased with the Lincoln-Kyl proposal and while NFU policy supports a $4 million exemption, either measure is preferable to pre-2001 law and he sees the possibility of a conference between the two chambers compromising to something close to what NFU has been supporting.
"NFU has always supported between the 35% and 45% tax rate," Goule said. "I think that is very important when it comes to estate planning for next year. We need to provide a permanent, stable plan so people can plan for the future."
The American Farm Bureau Federation has also voiced support of the Lincoln-Kyl plan. AFBF President Bob Stallman wrote a letter to Senate Majority Leader Harry Reid, D-Nev., on Wednesday urging him to have the Senate consider the proposal.
Stallman says estate taxes can hit farm families harder than other small business owners because 84% of farm assets are real estate-based. He says when estate taxes are due surviving family members may be forced to sell land, buildings or equipment needed to keep their operations going if they don't have enough cash on hand.
"NFU has been a long time supporter of permanent estate tax relief and we definitely think it needs to be done this year," Goule said. "The House has already acted on it so we are really looking to our Senators to try to get this bill through so we can get something done in 2010 so that our farmers, ranchers, rural Americans and small businesses are not hit by an unexpected estate tax."