It is said that nothing is certain in life, except death and taxes. If Congress does not act to permanently reform the estate tax, these two inevitabilities will continue to be linked for the heirs to a rapidly growing number of South Dakota farms, ranches and small businesses that would be impacted by the death tax.
The death tax gives the IRS one last chance to take a bite out of what South Dakotans have worked hard for a lifetime to earn. Heirs have frequently been forced to sell land that has been in the family for generations, just to pay the federal taxes.
In 2001, Congress wisely acted to phase out the death tax, but that phase out will expire in 2011 and will be reinstated at a maximum rate of 55 percent. During the debate just this past week on the Fiscal Year 2009 Budget Resolution, Senate Democrats defeated a measure that would have permanently reformed the death tax. Effectively, this means that Democrats are planning to use this additional revenue in future years to cover the increased level of spending included in their Budget Resolution.
Democrats claim that the death tax affects only the very wealthy, but in rural South Dakota this is not the case. Since 2001, when Congress enacted a temporary repeal of the death tax, South Dakota's average land value has increased 90 percent to $820 per acre. An average South Dakota farm consists of 1,400 acres, which with today's average land prices would be worth about $1.14 million. This amount does not include the value of all other taxable personal property, such as dwellings, livestock and machinery, which could add significantly to the total estate tax liability.
Very few heirs to South Dakota farms, ranches and small businesses would have the liquid assets necessary to pay the death tax or to pay lawyers to determine the legal maneuvers that millionaires use to circumvent the death tax. It is unfair to continue with a death tax which penalizes hardworking citizens who have spent a lifetime accumulating assets to pass on to and which would build better lives for their children – only to have a large portion of these assets "snatched away" by the IRS after they die. My colleagues misguidedly failed to abolish the death tax, and I hope the day comes soon when they agree to do the right thing, and abolish the unfair death tax once and for all.