Published on 04/24/01

New Plan Targets 'Death Tax' Reform

Under the current tax law, Coffee County farmer Donnie Smith would find it hard to leave his fifth-generation farm to his children.

"A family farm doesn't have a lot of cash assets," Smith said. "When the government comes to collect the death tax, that means having to pay dearly to pass on the farm."

Smith said his children all love farming but have sought jobs in other areas in the current farm crisis. He would still like to leave his farm to his family, though, and let them decide what to do with it after he's gone.

"They would have to sell it off to pay the tax right now," he said.

Will the repeal of the estate tax help the average Georgia farmer?

"This question basically requires a case-by-case analysis, since long-term capital gains tax rates are partially dependent on an individual's marginal ordinary income tax rate, " says Keith Kightlinger, an economist with the University of Georgia College of Agricultural and Environmental Sciences. "The answer will vary with the facts and circumstances of each individual."

U.S. Rep. Saxby Chambliss, R-Moultrie, told a group of Georgia farmers April 16 that the federal estate tax, also known as the death tax, should be repealed as part of President George W. Bush's tax plan.

Pass It Down

"Elimination of the death tax would give the American farmer the opportunity to pass the family farm on to the next generation of family farmers without the federal government reaching into their pockets for a 50 percent to 55 percent death tax," Chambliss said.

Many farmers like Smith aren't able to pass family farms on to the next generation, he said. "Their children are not able to be part of the great heritage of American farming," Chambliss said. "That is unfair and un-American."

In Bush's plan, farmers will also benefit from permanent extension of research and development tax credits, Chambliss said, which will allow companies to expand research in agricultural technologies.

The House of Representatives passed Bush's $1.6 trillion tax reduction plan. But the U.S. Senate made adjustments.

Will It Become Law?

"The Senate's plan is for around $1.2 trillion," Chambliss said. "It is headed for conference, and hopefully it will come out closer to President Bush's $1.6 trillion."

Because "of the new sheriff (Bush) in town," Chambliss said, the new tax plan will be pushed through so the tax surplus can quickly be returned to taxpayers, and family farms and small business owners can leave their hard work to the next generation.

"It will be law this year," he said.

"The tax code now is complex and not fair," Chambliss said. "We need to send the tax money back to the taxpayers across the state of Georgia."

Big Return for Georgians

If the Bush plan becomes law, it could mean big money for Georgia taxpayers, Chambliss said. In the April 16 meeting, he symbolically signed a giant U.S. Department of Treasury check to Georgia taxpayers for $29.5 billion, the amount that could be returned to Georgians over the next 10 years.

In the Bush plan, he said, a Georgia family of four making:
  • $35,000 a year will get a 100-percent federal income tax cut.
  • $50,000 a year will get a 50-percent tax cut and at least $1,600.
  • $75,000 a year will get a 25 percent tax cut.

Brad Haire is the former news editor with the University of Georgia College of Agricultural and Environmental Sciences.