Senator Warns Of Deeper 'Death Tax'

August 23, 2012

Aug. 22--Sen. John Thune said South Dakota farmers and ranchers need to know how proposed changes in the estate tax could impact them.

Estate tax legislation could force 71 percent of South Dakota's family farms to be sold or reduced in size, said Thune, R-S.D. He has sponsored a bill to end the "death tax," as he and other opponents call it, forever.

Thune said Senate Democrats have pushed for a lower exemption rate. Under the proposed change, the exemption would be reduced to $1 million next year instead of keeping it at the current $5 million.

With a dramatic recent increase in the value of South Dakota agricultural land, especially cropland, nearly three-fourths of family farms would be impacted, according to the American Farm Bureau Federation. Thune issued a release on that report Tuesday, and spoke about it in Mitchell later in the day.

"This report outlines just how devastating the Senate Democrats' death tax proposal would be to South Dakota farmers and ranchers," Thune said.

The Democratic-sponsored bill passed the Senate on a party line vote of 51-48 on July 25 as part of an effort to raise taxes on wealthier Americans.

It would also lower the exemption for the estate tax from its current $5 million to $1 million.

The Republican-controlled House has offered to extend all the so-called Bush era tax cuts. So far, no compromise is in sight.

Without a new deal on taxes, the $1 million figure will become the rate for the estate tax in 2013.

Thune said while farmers and ranchers may appear to be wealthy, most of farm assets are land, livestock and equipment, with small cash reserves.

The death of the primary property owner could throw families into a financial mess.

He said in the AFBF study, using 2012 farm real estate values, any property of more than 714 acres would likely exceed the $1 million exemption level. Crop producers would be particularly impacted by the lower exemption levels, as farms larger than 431 acres of cropland would be likely to exceed the $1 million exemption.

A report stated that most farmers in South Dakota have about 1,400 acres, but the number of large farms is growing, he said.

"You're going to have a lot of farmers who are larger than that, larger than 1,400 acres," Thune said. "If you go back to a million dollars, it's going to have a big effect in South Dakota."

He said the economic booms of the early 1960s, mid-1980s and early 2000s were linked to businesses feeling confident and spending more money.

All those good times came to an end for a variety of reasons, Thune said.

"I think the estate tax would have a similar type effect," he said. "This will become a much bigger issue as we come closer to the end of the year."

Thune introduced the Death Tax Repeal Permanency Act, which would permanently repeal the estate taxes, in March. The bill has 37 cosponsors and is supported by more than 50 groups and organizations but is not scheduled for a vote in the Senate.

Rep. Kevin Brady, R-Texas, introduced identical legislation in the House of Representatives and the bill has more than 200 cosponsors from both parties.

Scott VanderWal, president of the South Dakota Farm Bureau, said the report revealed potentially dangerous news for farmers and ranchers.

"The Senate should pass Senator Thune's death tax repeal bill, or at the very least, extend current levels to protect South Dakota's agriculture producers from this unfair tax," VanderWal said in a news release issued by Thune's office.

Drought

The second-term senator spent a few hours Tuesday afternoon at the Dakotafest agricultural trade show in Mitchell.

The hot summer that damaged a lot of cornfields and other crops was a primary topic of discussion.

"Mood's good, people are upbeat," he said.

"People know there are up and down years. There are people who are going to have a crop. Not many in this area."

But those who will have a good harvest will do very well, since prices promise to be high for corn and other crops. Those who face a lean year are glad for government programs.

"They are very thankful, very appreciative of the crop insurance program this year," Thune said.

The drought plaguing much of the country is a concern, but not as much as it may have in past hot, dry years, Thune said.

The improved crop insurance program has relieved pressure from producers, and efforts to open up Conservation Reserve Program (CRP) land and wetlands has helped as well, he said.

Farm bill

It's "pretty important" to get a five-year farm bill passed this year, Thune said.

If not, proponents will have to "start from ground zero" with a whole new Congress next year. He said he hopes to see it pass in September or October, but if not then, at least by the end of the year.

Most of the farm bill debate isn't about agriculture, he said. It centers on the Supplemental Nutrition Assistance Program, or SNAP, which takes up 80 percent of the bill.

The crazy quilt of programs known as the farm bill would total $969 billion over the next 10 years. Most of that, $768 billion, is for SNAP, which was formerly known as the food stamp program.

Thune said the Senate, which has passed its version of the farm bill, called for a $4 billion cut in SNAP. The House version, which has yet to come to a vote on the floor, is calling for a $16 billion reduction in SNAP.

"I don't think the $16 billion is out of line," Thune said, noting the program's massive growth in recent years.

Part of that can be attributed to the economic downturn, he said, but not all of it. The GOP wants to see the program cut while the Democrats are fighting to keep it where it's at.

"And that's where the big fight is in it," he said. "It's really about something that doesn't have anything to do with farm programs."

Ethanol

The ethanol industry must evolve into using a non-corn-based product, he said.

Some ethanol plants are powering down because of the high corn prices.

"The market is sort of responding to this," he said, referring to the drought and high corn prices.

Ethanol has a lot less political support now, as livestock producers, environmental activists, animal rights activists and the oil and gas industry now all oppose it. It's a rare political item that the far left and the far right both oppose, Thune said.

Cellulosic ethanol, using switch grass or something else, appears to be the answer, he said, even though he doesn't buy into the food vs. fuel debate over ethanol.

"They say it's close," Thune said of cellulosic ethanol production.

A new plant being built in Iowa can use either corn or other materials, he said.

Many politicians say they want to remove tax incentives for ethanol, he said, but in that case, the government should do away with incentives for a lot of industries.

Another option is to create a transition period and do it for all industries. That would allow businesses and investors to plan how to survive without the tax breaks, Thune said.

Akin comments

Rep. Todd Akin, R-Mo., needs to decide soon if he will drop out of the Senate race, Thune said.

Akin said victims of "legitimate rape" rarely become pregnant and indicated female bodies can somehow keep themselves from getting pregnant during a rape. The comments caused an uproar, with Republicans and Democrats condemning it and Akin this week.

"I think the seat's getting in more and more jeopardy," Thune said.

"He's got to make the decision based on what's in the best interests of Missouri, his family and what he believes in."

Thune called it a "terribly offensive statement, obviously one that he now recognizes and owns up to." Thune said he has maintained a steady position on abortion since he first ran for Congress in 1996. "I've always allowed exceptions on that," Thune said. He said he believes in the 1984 Reagan platform plank which opposes abortion but allows exceptions in cases of rape, incest and the health or life of the mother.

Thune said he knows Akin a bit and served two years with him in the House. The comment that sparked this controversy surprised him, Thune said.

"You wonder sometimes with candidates what compels him. It demonstrates a real lack of judgment," Thune said. "It was a real inappropriate thing to say. I'm sure he'd love to have it back."

Sea of Galilee swim

Congressman Kevin Yoder, R-Kan., is a smart man who did a very dumb thing by swimming nude in the Sea of Galilee during a congressional junket, Thune said, responding to another blooming controversy.

He met Yoder in 2010 when he did an appearance in Kansas, Thune said.

"He's kind of a young, bright kind of guy," he said.

But Thune said the freshman congressman's decision to drop his clothes and jump into the water during the trip to the Holy Land was a self-inflicted wound.

Convention role

Thune reportedly will play a fairly prominent role in the 2012 Republican National Convention, which opens in Tampa, Fla., on Monday.

He declined to reveal what he will be doing when asked Tuesday, but a staffer said his role will be announced in a news release today. Thune endorsed GOP presumptive nominee Mitt Romney in 2011 and has campaigned for him.

Thune said he will arrive in Tampa on Monday.

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