As Congress prepares legislation related to the fiscal cliff, National Farmers Union urges Congress to take action on tax reform in addition to spending reductions.
"There has been a lot of discussion recently about the impending cuts that could occur during sequestration. However, that's only half of the matter," said NFU President Roger Johnson. "The best way to deal with the deficit is to sensibly raise revenues and to reduce expenditures – not just one or the other."
NFU supports continuing the 2001 and 2003 tax cuts for those who earn less than $200,000 per year, or $250,000 for married couples, while allowing the reductions for those who earn more than that to expire. Allowing the Bush-era tax cuts to end for the top two% of earners will raise $849 billion over the next ten years to put towards deficit reduction.
Congress must also act in order to make sure that more middle-class families and individuals are not required to pay higher taxes due to the Alternative Minimum Tax. Previous fixes have been passed to index the AMT to inflation, and Congress needs to work together in order to make sure that happens again.
The estate tax also requires Congressional action in order to remain effective and fair.
"The estate tax is an important part of our federal tax code, and it stands to reason that it be continued. However, it needs to be set at a level that is not overly burdensome," said Johnson. "We look forward to working with Congress and the president to make sure a workable compromise can be reached."
Under current legislation, the first $5.12 million of an estate are exempt from taxes, and the maximum tax rate on the value in excess of $5.12 million is 35%. If no legislative changes are made to the estate tax, the exemption will fall to $1 million with a maximum tax rate of 55% in 2013.
President Obama has proposed restoring the estate tax to 2009 levels, which would result in new tax revenues of $143 billion over ten years. The capital gains tax rate is also scheduled to increase from 15 to 23.8%, which will drive land acquisition decisions.
NFU supports setting the exemption per estate to $5 million, with a graduated tax rate starting at 35% on the value of the estate above $5 million, or $10 million for a married couple. NFU opposes shifting tax liability from the estate tax to the capital particularly through the elimination of the "step-up" in basis provision.