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Ending Inheritance Tax a Priority to Many Farmers

Rural property owners say the tax on inheritances punishes them for working hard, and that it often prompts some families to sell the farm when the older generation dies.

Tennessee farmers flooded the state Capitol for Ag Day on the Hill Tuesday, in part to show off their livestock and the impact of farming on the state’s economy — but also to urge lawmakers to eliminate the so-called “death tax.”

The tax applies to inheritances, which to them means paying thousands to tens of thousands of dollars if they are left the family farm and its value exceeds $1 million.

“I already paid for it once. And I already pay taxes on it every year to keep it,” said Mark Klepper, a farmer and former Greene County board member for the Tennessee Farm Bureau.

“You work hard all your life to make the money, you get taxed on it while you make it, you get taxed on it to keep it and the interest you make of it. And then when you die, your children have to pay tax on it just to keep it again,” he said. “It’s not fair for the person who actually works to achieve wealth gets punished for working.”

Gov. Bill Haslam is making it his priority to scale back the tax on inheritances this year. His plan, SB3762, includes raising the existing tax exemption from property and wealth valued at $1 million to $1.25 million. His administration’s long-term goal is to increase that to $5 million over several years.

The bill hasn’t moved far in either chamber of the General Assembly, generally because lawmakers were waiting for state officials to finalize the plan’s budget impact. It would save taxpayers some $14.2 million, but would also mean that much less in the budget to fund programs. It is scheduled for a hearing in the House Finance Subcommittee Wednesday.

Wearing a button that read “Kill the Death Tax,” House Speaker Beth Harwell said the measure is crucial to farmers.

“Unfortunately, because we have such an aggressive death tax in this state, a lot of times they have to sell the farm when someone passes away in order to pay the death tax rather than let the family inherit it and keep it in the family. We want to stop that,” she said.

The Beacon Center of Tennessee has also pushed to eliminate the death tax. The free-market think tank released a report recently that profiled farmers who say the tax has hurt them, including a cattle farmer from Robertson County and a farmer in Christiana who deals in row crops and cattle.

“Tennessee is one of only two states in the south that imposes a death tax, and not a single state in the Sun Belt has a death tax,” the reports stated. Another study the Beacon Center co-authored with Arthur Laffer’s Center for Supply-Side Economics concluded that the inheritance tax “is an immoral tax that hits homeowners, small business owners & farmers disproportionately hard.”

The tax on inheritances is one of several lawmakers are pushing this year, including the taxes on food, gifts and interest from stock and bonds.

Lowering the death tax is the most important because it is “disruptive to the family farm, disruptive to our rural heritage,” said Tom Brown of Manchester, who is part of the Tennessee Farm Winegrower’s Alliance. “They get carried away with the taxation system to fund all these entitlement folks, and that’s not what America was built on. The backbone of the American economy is small business and the family farm.”

Lt. Gov. Ron Ramsey is confident the state will gradually lift the death tax exemption, but it’s going to take time.

“We can’t just pass a bill and worry how to pay for it down the road. That’s the reason why we’re going to do it in stages to get rid of this,” Ramsey said. “If there’s any industry in the state this affects more, it’s farmers, the people that probably inherited their farm, and they want to pass it on to their kids, too.”

Ramsey said he’d like to see lawmakers also reduce the Hall tax this year, which taxes interest from stocks and dividends. However, Harwell and Haslam have said they plan to take a pass on that this year.

2 replies on “Ending Inheritance Tax a Priority to Many Farmers”

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