Saturday, July 2nd, 2011
Farmers laud estate tax repeal
Change helps next generation of growers
By Shelley Grieshop
A provision in the state's new budget that nixes estate (death) taxes could help. . .
GRAND LAKE AREA - Farmers across the state are applauding the repeal of the estate tax in Ohio's new, two-year budget plan.
Gov. John Kasich on Thursday signed the $55.8 billion budget that abolishes estate taxes for all residents beginning January 2013. Farmers and others with interest in agriculture say the action will help preserve family farms that often are passed from one generation to the next.
"It's good for agriculture and good for Mercer County and its residents," said Alan Wolters, a certified public accountant with Moorman Harting & Company of Coldwater and Celina.
Wolters, who's handled finances for more than 20 years for area farmers, said his clients often are forced to sell off small tracts of land to pay the estate tax when transferring ownership to children. Others take out loans or large life insurance policies to cover the tax, he added.
The current law places a 6 percent tax on all estates valued between $338,333 and $500,000. Estates valued over $500,000 are taxed at 7 percent.
Assets now taxed include real estate, bank accounts, stock, tangible personal property (autos, furniture, etc.), trusts, business interests and some life insurance benefits.
The federal government also enforces an estate tax but with an exemption for assets valued below $5 million per person or $10 million per couple.
Don Broering, a retired crop farmer in Coldwater, experienced the estate tax first-hand when transferring a portion of his farm to his son. He's certain the repeal will help promote agriculture in the long-term.
"There's no question about it. It will enable more farmers to pass land down to their children," he said. "Right now there's a tremendous amount of estate taxes to be paid when you do that."
With farmland in the local area selling at more than $10,000 an acre, it doesn't take long to reach the $338,333 threshold, Broering said. He estimates one out of 10 farmers places his assets in a trust before his death to avoid the tax. However, that's expensive, too, he said.
"Lawyers get their cut and that costs quite a bit," Broering explained.
The issue is an important one to the Ohio Farm Bureau, which has worked for 25 years to get the "death tax" repealed, agency officials say.
"The American dream includes working hard, investing wisely and spending sensibly so that we can pass on something to our children," said Jack Fisher, executive vice president of the state organization. "Our homes, farms, businesses and other assets have already been taxed, which is why the farm bureau felt taxing them again upon the owner's death was extremely unfair."
Fisher said farmers typically invest their earnings in equipment, buildings and land and are left with insufficient cash to pay the death tax. The burden then falls on their heirs, which can be discouraging, he said.
Not everyone is pleased with the estate tax repeal. The revenue it produces feeds the coffers of counties and small communities who count on those dollars each year, officials say. Eighty percent of the tax goes to the villages, cities and townships where the deceased person lives; the remaining 20 percent is garnished by the state.
Mercer County netted $1.53 million in estate taxes in 2010 to help balance its own budget.
Ohio's Director of Agriculture Jim Zehringer of Fort Recovery understands both sides of the issue. Although his present job sways sympathy with farmers, his former position as Mercer County commissioner gives him insight into the impact of the revenue loss.
Zehringer believes the budget provides adequate options for replacement of the estate tax dollars.
"The governor's budget provides local government several important cost-control tools such as health care pooling, prevailing wage reform and promoting shared services," he said.
Zehringer said the tax repeal will have a positive long-term effect on all Ohioans.
"This is great news for Ohio farm families and small business owners, which will allow them to pass these major investments on from generation to generation," he said.
Estate tax collections:
City/village 2009 2010
Burkettsville $0 $0
Celina $124,225 $183,573
Chickasaw $0 $0
Coldwater $285,603 $385,943
Ft. Recovery $39,020 $29,620
Mendon $0 $0
Montezuma $0 $0
Rockford $0 $331.06
St. Henry $51,884 $32,500