Farm bill extension, estate tax fix boosts farmers, ranchers

2013-01-02T23:00:00Z 2013-01-03T13:46:04Z Farm bill extension, estate tax fix boosts farmers, ranchersBy TOM LUTEY tlutey@billingsgazette.com The Billings Gazette

Turns out there was a haystack for farmers to land on at the bottom of the "fiscal cliff."

In the liner notes of the 12th-hour plan to avert tax increases on most Americans, lawmakers included a nine-month extension to the 2008 farm bill and a fix for expiring estate tax terms.

The extension removes some uncertainly about U.S. agricultural policy as farmers edge toward spring planting. Federal farm programs, or the lack thereof in the case of an expired farm bill, have a profound effect on the business risks that farmers and their bankers are willing to take.

Farmers pushed for passage of a five-year farm bill but said Wednesday that they would settle for the extension and work toward a permanent bill by September’s end.

“A five-year bill, that was our goal. That’s what we stood by the whole way,” said Ryan McCormick, Montana Grain Growers president and a Hi-Line farmer. “But the extension, this is as good a scenario as we could expect.”

The extension means farmers will receive direct payments from the government, something producers had agreed to give up in the proposed 2012 farm bill. That bill stalled in the House of Representatives, where Republican leadership declined to bring it to the floor for a vote. The Senate passed a 2012 farm bill version last June. The House Agriculture Committee signed off on its version a month later. Those bills would cut at least $23 billion from current farm bill spending over the next decade, but still presented issues for House Speaker John Boehner, R-Ohio. Boehner objected to what he called a “Soviet style” milk subsidy program.

In the end, it was concerns about milk prices doubling as the dairy subsidies expired in early 2013 that forced passage of the extension.

The other major issue for farm country was the permanent setting of estate tax rules. Estate taxes have been adjusted downward at least six times since 2001, but always with the possibility of increasing as lawmakers continually placed sunset provisions on their cuts.

The next congressionally imposed end to estate taxes was to come Jan. 1, at which point the current a 35 percent tax on estates worth more than $5.12 million was to jump to 55 percent. And the value of the estate exempt from the tax was to drop to $1 million.

Farmers and ranchers said the rule changes on Jan. 1 would have made it impossible to pass family property to the next generation without selling off a significant portion to pay the tax man.

The terms agreed to in the fiscal-cliff package ensure that moving forward estate taxes won’t be collected on inheritances of $5 million or less. Husbands and wives can pair the individual exemptions to prevent estate taxes on inheritances as large as $10 million. The exemption is also indexed for inflation, meaning that by the end of the decade the individual exemption rises to $7.5 million.

“The certainly of the $5 million per person, the $10 million per couple is very significant. We wanted to keep the rate at 35 percent. It got bumped up to 40, but I think it’s a good trade-off,” said Erol Rice, Montana Stockgrowers Association executive vice president.

Rice and McCormick credited U.S. Sen. Max Baucus, D-Mont., with setting the terms for the estate tax, which many Democrats in the Senate didn’t support.

“We’re ecstatic. That’s a victory for us for sure,” McCormick said. “We need to thank Sen. Baucus and his team."

Other taxpayers with large estates might find ways to avoid the estate tax by putting their property into trusts. But trusts are problematic for working farms and ranches because they cannot be borrowed against, McCormick said.

Baucus told The Billings Gazette on Wednesday that it wasn’t easy getting the estate tax language included in the fiscal-cliff deal, in part because rural farm and ranch estates are unfamiliar to urban lawmakers.

“I pushed very hard and a lot of Democratic leadership didn’t. But I stand up for my state,” Baucus said. “It means Montana farms and ranches will not have to pay more than they currently pay. Next, it’s permanent. It’s not a two-year bill or a five-year bill. It’s permanent.”

Baucus said many members of his own party also objected to indexing the estate tax exemption to inflation, but with Montana farm and ranch land values rising sharply, it the exemption had to rise through the decade to keep up.

“We got permanent law and permanent indexing. That’s a big win,” Baucus said. “We’re sure in a lot better position than we would have been if we didn’t address estate taxes at all in this fiscal-cliff situation.”

Speaking of the farm bill extension, Baucus said it was necessary to get another nine months to pass a farm bill. With the Senate already passing on a bipartisan vote and the House having approved a bill, he expected the work of 2012 to steer a farm bill to completion by September.

“It’s a good starting point,” Baucus said of the Senate version. “It passed by a large margin in the Senate.”

But Baucus said he would begin the year by working on a separate bill to address livestock disaster programs, which were left out of the extension. After the worst drought in a half-century, American ranches finished 2012 dry and looking for help, but the programs designed to assist had expired.

Agriculture funding is going to be battle this year, with lawmakers focused on trimming deficit spending.  

Copyright 2015 The Billings Gazette. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

(10) Comments

  1. ranchhand28e26
    Report Abuse
    ranchhand28e26 - January 03, 2013 4:51 pm
    Does anyone here think the farm bill passed because of farmers and rancher? What a joke, the farm bill was extended because it is full of entitlement spending, actually over 80% of it has nothing to do with farming. If you receive food stamps, school lunch or a bunch of other welfare type programs you are taking from the farm bill.
  2. Kuato
    Report Abuse
    Kuato - January 03, 2013 11:49 am
    Unbelievable ,this truly is "a mafia"controlling our nation
  3. haro
    Report Abuse
    haro - January 03, 2013 11:44 am
    Thanks alot Max! A few of these city folks, just don't seem to understand that they are better off for this. I only wish that they would study and understand the ramafications of this farm bill before they make statements like some of the ones seen here. If we all pull for each other, it will improve our rural and urban economys and in turn make for a stonger and more congenial Montana.
  4. staceyronq
    Report Abuse
    staceyronq - January 03, 2013 11:12 am
    blackpowder everyones job subsidied yes, welfared, like farm bill receivers aka welfare, nope. raise prices. someone else will buy their places and figure out how to run it more profitable. the American way.
  5. Carl Dungess
    Report Abuse
    Carl Dungess - January 03, 2013 10:48 am
    Funny that ol' Max didn't mention the great work he did in making sure provisions were also included in the legislation allowing multinational corporations (GE, Citigroup, etc) to continue to transfer their profits offshore in a move called the "active financing exception" so that they don't have to pay taxes. He also made sure that special provisions were included that allowed these same companies to receive $76 billion in tax credits. Meanwhile, most households in the US are going to see a minimum tax increase of $1300 to $2400 a year. Yeah, ol' Maxie is making sure he is fighting for Montanans!! As for Tester, he only does what Max tells him to do.
  6. Johnboy777
    Report Abuse
    Johnboy777 - January 03, 2013 9:30 am
    Just looking at Baucus photo makes me stomach turn.....
  7. Rancher59042
    Report Abuse
    Rancher59042 - January 03, 2013 9:19 am
    if you buy into the theatrics that took place in Washington DC this week you must believe that Elvis is alive and living in Hawaii with JFK.
  8. blackpowder
    Report Abuse
    blackpowder - January 03, 2013 9:02 am
    Yea, and you two would have been bitching and moaning if the price of milk and food increased. Everyone's job is subsidized by someone else.
  9. staceyronq
    Report Abuse
    staceyronq - January 03, 2013 7:50 am
    I wish government would pay me to run my business, oh yea thats welfare.
  10. right is right
    Report Abuse
    right is right - January 03, 2013 6:46 am
    "Turns out there was a haystack for farmers to land on at the bottom of the "fiscal cliff."

    A haystack for farmers and a pile of "processed partially digested hay" for the rest of us. Good job, Max and Jon, now give us something to take the smell away.

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