Blog for Rural America

The Center for Rural Affairs, a private, non-profit organization, is working to strengthen small businesses, family farms and ranches, and rural communities. Permission to reprint items from this web log is hereby granted, on the condition that clear credit is given to the original source of the material. If the blog provides information for a story, please let us know by sending an email to

Saturday, September 30, 2006

Neil Harl Letter Regarding Estate Tax

Goehring’s mistaken on his points regarding estate tax

Neil E. Harl

The Jamestown Sun
Published Thursday, July 27, 2006

Doug Goehring’s letter to the editor on the estate tax has come to my attention. The article is misleading with several untrue statements. It is a myth that farms are adversely impacted by the federal estate tax. That has been an artfully-spun tale by a group of very wealthy families over the past decade and it is untrue. A few years ago, I was quoted in the New York Times (April 8, 2001) as saying I had never seen a farm that had to be sold to pay federal estate tax. And that is still the case. My observations range over more than 45 years with more than 3,200 seminars in 43 states for farmers, bankers, attorneys, CPAs and others, including many all-day seminars in North Dakota.

The American Farm Bureau Federation was quoted, in the same article, as saying that “... it could not cite a single example of a farm lost because of estate taxes.” A few days after that front page article ran in the Times, the AFBF put out a notice to its offices asking for a search for farms lost to pay federal estate tax. It was my understanding, from informed individuals, that they never located one.

There are very good reasons why that is the case. First, each decedent presently can pass $2 million in asset value without paying federal estate tax. That is $4 million for a husband and wife. Second, Congress has been very generous over the years and allows a substantial reduction in valuation of farm land (under special use valuation) at death with the discount now totaling as much as $900,000. Also, there are various other discounts that can be claimed including a co-ownership discount (usually around 20 percent) and an entity discount (often 35 percent, sometimes higher).

My research indicates that less than 1 percent of farm estates have to file a federal estate tax return and even fewer have to pay any federal estate tax. Interestingly, decedents with estates more than $20 million have the largest average amount of farm property $992,738 in 2004. That group includes very few bona fide family farmers. If there is anyone who might complain, it is the Ted Turners of the world who have been buying up large land tracts throughout the Plains states. In 2004, the top 808 estates (those with estates exceeding $20 million in taxable estate – that’s above the exclusion amount) paid an average of $3.99 million in federal estate tax. That is the measure of tax benefit had the federal estate tax been repealed in 2004.

Contrary to Goehring’s assertion that repeal of the federal estate tax would not take one cent out of the federal coffers, more than $21.51 billion was paid in federal estate tax in 2004 and the figure is expected to be higher in 2006 because of the rapid run-up in estate values. At a time when the federal budget deficit is running at an alarming level, throwing more than $20 billion out of the federal revenue stream should be of concern to anyone worried about fiscal responsibility. Unless spending is cut, every dollar lost from federal estate tax repeal must necessarily be made up with another source of revenue. Is a hike in income tax more palatable?
The top rate for deaths in 2006 is 46 percent, not 55 percent as Goehring said, a rate paid by a tiny, tiny fraction of the estates.

I might add that North Dakota has ranked at or near the bottom for years in the average amount of federal estate tax paid per estate. The big run-up in wealth in recent years has largely bypassed the states that are heavily agricultural.

Finally, the big worry for farms and ranches should be the possible loss of the new income tax basis at death. The repeal provision passed in 2001 would, after 2009, drop the concept of a completely new basis for assets held at death. That is of concern to everyone who inherits property, up and down the income and asset scale.

Neil E. Harl
Ames, Iowa
(Harl is the Charles F. Curtiss Distinguished Professor in Agriculture and emeritus professor of economics at Iowa State University, Ames)

post a question or comment here or contact John Crabtree,

Center for Rural Affairs
Values. Worth. Action.

Tuesday, September 26, 2006

Who'll Sit Up With The Corporate Sow?

Corporate Farming Notes - November 26, 2006

Sow production concentrates at Smithfield; request for merger review unanswered; jury awards $4.5 million in damages against PSF

by John Crabtree,, Center for Rural Affairs

>> Successful Farming’s annual Pork Powerhouses edition hit the news-stands in October, detailing an expansion of 323,000 sows in production over last year. Seventy-five percent of that expansion was concentrated in the hands of Smithfield Foods, the nation’s largest pork producer and packer.

Comparing last year’s numbers to 2006, Smithfield’s proposed merger with Premium Standard Farms (PSF) would bring nearly one million sows from 2005 under Smithfield’s banner. However, Successful Farming lists 1.2 million sows in production under Smithfield, representing an additional increase of 240,000 sows for the pork conglomerate. Presumably, this represents increases at both Smithfield and Premium Standard facilities.

The magazine’s list of largest producers shows an increase of nearly 50,000 sows for Triumph Foods in St. Joseph, Missouri, the only other large increase among the nation’s 20 largest producers. The remaining sows were added in smaller increments spread among six of the remaining 18 largest producers.

>> As of this writing, we know of no response from the Department of Justice or USDA’s Packers and Stockyards Administration to numerous calls for a thorough review of the Smithfield acquisition of Premium Standard. Senator Tom Harkin (D-IA), Senator Chuck Grassley (R-IA), National Farmers Union, the Center, and others have requested action from Justice and USDA.

>> On September 22, only weeks after the announcement of Smithfield’s acquisition of Premium Standard, a jury in Jackson County, Missouri, ordered PSF to pay $4.5 million in damages to three families who live near Premium Standard’s production facility in Trenton, Missouri. The lawsuit was focused on neighboring families’ battles with odor from the facility.

The jury also found grounds for punitive damages against Premium Standard, but the company agreed not to appeal the actual damages in exchange for the plaintiffs’ agreement to drop their requests for punitive damages.

According to the families’ attorney the verdict is “the biggest award in the nation against a major confined animal producer.” Premium Standard has fought a long, running battle with neighbors and some Missouri regulators and policymakers. But there was no indication that the verdict surprised Smithfield, nor any indication it will impact the merger.

Agree? Disagree? Post a comment here or contact John Crabtree,

Center for Rural Affairs
Values. Worth. Action.