South Dakota is a state that runs on small businesses and family farms. In the face of the economic and regulatory challenges thrown at them over the past several years, the resilience of our business and agriculture communities is inspiring. Unfortunately, there is another challenge on the horizon. This challenge is the estate tax, commonly referred to as the "death tax."
On January 1, 2013, this tax is scheduled to skyrocket and ensnare an increasing number of South Dakota's family-owned businesses and farming and ranching operations. Currently, a family can exempt up to $5 million from the death tax, and any assets exceeding that are taxed at 35 percent. Unless action is taken soon, beginning in January families will only be allowed to exempt $1 million, and any excess assets will be taxed at a staggering 55 percent.
Don't get me wrong, $1 million is a lot of money. However, we have to consider that many farmers and small business owners are "cash poor" but "asset rich." This means their land or business value is high, but those assets aren't liquid. So in order to pay estate taxes, many families would be forced to sell assets or take out a loan to settle the bill. Under the new estate tax policy scheduled to go into effect in the new year, a whole lot more South Dakotans could face the penalty. This is a problem that has been accelerated for many in rural America by the increasing value of land.
According to data compiled by the nonpartisan Joint Committee on Taxation, nearly 14 times as many small businesses and 24 times as many farms would be hit by the death tax. In South Dakota alone, we're looking at as many as 71 percent of crop producers being impacted, according to the Farm Bureau.
Many in South Dakota know my story. When my father died unexpectedly in an accident on our farm, we were hit with the death tax and made the decision to take out a loan so that we didn't have to sell land. No family should have to make the decision we were forced to make. That is why I continue to advocate for the permanent repeal of the death tax.
I am proud to come from a state with such a strong heritage of agriculture and work ethic, but the estate tax threatens the hard work so many have done to build businesses and farming and ranching operations. I will continue to fight for full repeal of the death tax and, at the very least, an extension of the current rates until we can deal with this tax in comprehensive tax reform.
Put simply, death should not be a taxable event. Hard working South Dakota families shouldn't pay the consequences of Washington's failed policies.