Fox revives ancient myth that the estate tax kills "a lot of" farms


It's a tale seemingly older than the tax itself: The estate tax destroys farms and family businesses by forcing poor, grieving families to sell the farm they inherited, just to pay for the tax.

That's the claim Fox & Friends scraped out of the barrel today, that this "terrible" tax causes "a lot of people" to "sell the farm to pay the death tax." It's the same claim Newt Gingrich enjoyed making in the 90s, the same claim trotted out to defend the estate tax phase-out President Bush signed into law in 2001, and it's the same claim used as we get closer and closer to the planned reinstatement of the tax in 2011. There's just one problem: It's never really been true. Here's the morning crew getting a little retro with their attacks this morning:

But see, even before Bush implemented a gradual phase-out of the estate tax by steadily increasing the minimum amount of the estate required for the tax to kick in and decreasing the tax rate until it eliminated out in 2010, not many family farms were adversely affected by the tax.

In 2000, before Bush's cuts, only estates over $1 million were subject to the tax, and as the Citizens for Tax Justice noted, farm estates were able to claim an extra $300,000 exemption on top of that. The amount of the estate over $1,300,000 was taxed at rates of up to 55 percent. Additionally, farms were valued at their "current use," rather than the value the land would get if sold for development. Because of this, and because farm estates are generally smaller than other estates, only 1,659 farm estates owed any taxes at all. Furthermore, the CBO found that only about 8 percent of those estates subject to the tax owed more in taxes than they inherited in "liquid assets."

And that was before the Bush cuts took effect. By 2009, estates owed no taxes at all on the first $3.5 million inherited and paid rates up to 45 percent. The Tax Policy Center (TPC) estimated that due to those changes, only about 80 family farms would owe any estate taxes at all, and half of those would have liability below $1 million.

And the deal President Obama proposed on December 6 promised to be even more generous, allowing for $5 million to be inherited without any tax, and any amount over that minimum would be taxed at 35 percent. So it's fair to assume that even fewer family farms would owe any estate tax at all, let alone need to be sold to pay the tax owed, as Fox & Friends suggested.

In short, even if the Democrats push to increase the tax rate to 45 percent, as Steve Doocy suggested, the myth of the mass selloff of family farms gets even more far-fetched with each passing year.

Posted In
Economy, Taxes
Fox News Channel
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