The Wall Street Journal reported some politicians and experts are debating whether farmers and family-owned businesses may be the true victims of the return of estate taxes. The Obama-GOP tax deal says estates over $5 million will be taxed at 35 percent, which differs from most of the Democrats' want for a 55 percent tax rate on estates worth at least $3.5 million.
Democrats argued that the country's current deficit and the inequality between the wealthy and less affluent calls for a higher tax rate. Republicans disagreed and said the estates of farms and family businesses may suffer as a result of lower tax rates. Senator Chuck Grassley said the current agreement on the estate taxes "makes sure the government can't take more than half the estates of farmers and small business owners."
However, economist Brian Raub said farms and family-owned business only make up a small portion of the estates that are worth $3.5 million or more. Studies revealed that investment real estate, like farms, undeveloped land, and real estate partnerships, accounted for just 15 percent of the total number of estates over $3.5 million in 2007. Farms represent an even smaller fraction of that 15 percent.
Many politicians think the idea that farms and family businesses would carry the burden of the taxes can be misleading. Publicly traded stock actually accounted for most the large estates, which made up over a third of the assets under estates of $3.5 million or more. Experts say people may just continue to debate on whether the tax threshold should stick to $5 million or $3.5 million.
To learn more about how the estate tax affects your assets, seek legal counsel from an experienced NY estate planning lawyer or visit the Related Resources links for general information.