Budget would increase grazing fees, lower estate tax exemption levels

Farm Forum

The thought of a balanced budget in Washington is one that many of us find hard to believe. President Obama released his 2014 budget proposal last week, and though the proposal won’t likely fly with Congress, it is important to note the impacts the president’s budget would have on agriculture, including $38 billion in cuts over 10 years to agricultural programs. The U.S. Department of Agriculture’s (USDA) budget would be $146 billion dollars, which would be a $10 billion dollar cut from fiscal year 2013. And, despite all the talk of budget cuts, the president’s plan would increase government spending by 2.5 percent over this year alone.

There are a couple of glaring issues outlined in the president’s budget which clearly provide further evidence that the current administration is out of touch with agriculture and rural America. One of these issues is with regard to federal lands grazing. As in the president’s proposed budget last year, this proposal includes an increase in the public lands grazing fee assessment which would put many family ranchers out of business. Specifically, the budget calls for the Bureau of Land Management (BLM) and the U.S. Forest Service (USFS) to impose a $1 per animal unit month (AUM) increase above the grazing fee to cover administrative costs. Federal lands ranchers are and always have been willing to pay a fair price to graze livestock on public lands. They willingly invest significant amounts of money to manage and improve the range. In fact, most public lands ranchers already pay market price for their federal forage, when considering factors such as added regulatory costs, increased predation, ownership and maintenance of water rights and improvements and the difficulties of managing livestock in rough, arid rangelands. Ranchers should not bear the burden of paying for “bureaucratic administrative costs” that are out of their control, including costs such as attorney fees paid from agency budgets to radical special interest groups who often file frivolous lawsuits. Arbitrarily increasing the grazing fee via a tax, as the president has proposed in his budget, would impose unnecessary costs on farmers and ranchers working every day to produce safe and affordable food and fiber.

Though NCBA’s top five policy priorities list for 2013 does not include the estate tax, it continues to be a very important issue for cattlemen and women. At the end of 2012, Congress passed the American Taxpayer Relief Act (ATRA) narrowly avoiding a return to a $1 million estate tax exemption with a 55 percent tax rate. ATRA permanently extended the estate tax exemption level at $5 million per individual ($10 million per couple) and raised the top tax rate to 40 percent. ATRA also maintained the spousal transfer, step-up in basis and indexes the estate tax for inflation.

However, the word “permanent” only goes so far in Washington. The president’s budget proposes to raise the tax rate to 45 percent and reduce the exemption level to $3.5 million, without being indexed for inflation. This tax hike would take place in 2018, two years after the president’s term ends. If these proposed changes to the estate tax were to become a reality, it would be devastating for farming and ranching families. With 96 percent of American farms and ranches owned and operated by families, the estate tax is considered one of the leading causes of the breakup of multi-generation family farms and ranches. Unlike the rhetoric that comes from the administration on taxing the wealthy, the estate tax is not a tax on the wealthy elite in America. The wealthy can afford accountants and estate planners to help them evade the tax. It’s a death warrant for small-to-medium sized family businesses, such as those which dot the landscape of rural America and produce food to feed our nation and the world. While NCBA continues to support the full and permanent repeal of the death tax, permanency in the tax code provides less certainty for estate planning. Proposing to change the estate tax after what was presented as a permanent fix only creates more uncertainty for farmers and ranchers.

Though the president’s budget proposal is not likely to pass Congress “as is,” it does present this administration’s point of view.

Increasing the grazing fee and lowering the estate tax exemption rate, along with a tax rate increase, during these times of economic uncertainty will unnecessarily increase burdens on livestock producers and hamper their ability to create jobs and generate economic growth in their communities. NCBA is committed to representing cattlemen and women, and will continue working with members of Congress to do what’s in the best interest of ranchers, and thereby our nation’s natural resources, to ensure a sustainable future for our industry and rural America.