Mitt Romney, in an effort to garner support from farmers in the Midwest, promised to abolish the estate tax earlier this week during a campaign in Iowa. As our New Jersey readers may know, the Bush-era tax cuts are set to expire at the end of the year, and there has been a bit of a scramble to take advantage of the unusually high exemption amount, which is currently at $5.2 million. In 2013, the exemption amount is set to drop to $1 million.
In addition to a reduced exemption amount, 2013 will usher in high tax rates. Romney, along with many Republicans, is concerned that the reduced estate tax exemption amount and increased tax rate will force many famers of even modest size to sell off some of their property in order to cover taxes.
Farm economy experts, though, say that, despite all the political rhetoric, estate tax actually isn’t much of a concern for Iowa farmers. The impact, they say, is rather small since the majority of landowners give their land to descendants as a gift prior to their death.
A bigger concern would be if capital gains taxes increased along with the expiration of the exemption amount. In his Tuesday speech, Romney didn’t address the effect of higher capital gains taxes on family famers specifically, though he did comment that nobody making less than $200,000 per year should have to pay capital gains taxes.
Estate tax minimization is an important aspect of estate planning, although it does have to be balanced against other estate planning goals. It will be interesting to see how the 2013 estate tax changes affect this area of law practice.
Source: DesMoines Register, “Romney: It’s time to eliminate the estate tax,” October 10, 2012