Wyomingites will see the return of a state estate tax if the country falls off the “fiscal cliff,” according to Dan Noble, excise tax administrator with the Wyoming Department of Revenue.

Additionally, the Cowboy State and the rest of the country could expect a 20 percent jump in the federal estate tax, also known as the death tax, if Congress and the White House can’t reach an agreement to avoid sequestration by Dec. 31.

All citizens are in jeopardy of paying more on money or property they inherit, but small businesses in the agriculture industry fear federal tax hikes, mixed with the revival of a state tax, would cripple family operated ranches and farms in Wyoming.

If ranchers want to pass their operation to the next generation, the average family can’t afford to pay the estate tax based on livestock sales alone, Lander rancher Jim Hellyer said. Because ranchers are short on liquid capital and long in land value, it’s hard to keep pace, he said.

Barring an agreement between now and Dec. 31, the sequester would trigger automatic tax increases for everyone and federal spending cuts on Jan. 1. The federal estate tax rate would climb from 35 percent to 55 percent and the exemption threshold would nosedive from $5 million to $1 million for single couples and from $10.24 million to $2 million for married couples.

Those numbers may seem high to the average American, said Chris Bastion, an associate professor in the Agriculture and Applied Economics Department at the University of Wyoming. But, he said, people not connected with the agriculture industry “just don’t understand.”

“A million wouldn’t buy you an economic unit in the ranching industry today,” Natrona County Commissioner and third-generation rancher Rob Hendry said.

The average ranch in Natrona County sold for $3.4 million between 2002 and ’04, according to a UW study. Today the average value of Wyoming agriculture operations is $16.3 million, according to the U.S. Department of Agriculture.

Jim Magagna is executive vice president of the Wyoming Stock Growers Association. He said developers and the wealthy are driving up land values in the state.

“Land values in Wyoming are not representative of what the land is worth to raise cattle or grow a crop,” Magagna said.

The state estate tax would resume the former revenue-sharing plan between Wyoming and the federal government. Residents would have to file a Wyoming tax form, but the revenue would be shared nationally, said Norton Francis, a senior research associate at the nonpartisan Tax Policy Center.

The state estate tax expired in 2005 after the federal government increased its own rates and converted its credit plan with states into a deduction, Noble said. It’s an ad valorem credit based on the worth of an estate and increases with the estate’s value. For a ranch worth a little more than $1 million, there would be a $38,000 fee plus a 6.4 percent tax on the approximately $962,000.

Francis said the state estate tax would bring in an additional $12 million per year to Wyoming. Noble said the amount would depend on the year.

“It could easily be that much,” Noble said.

Philip Ellis is a ranch owner from Chugwater. He said estate planning is the best way to avert paying the highest estate tax rates. Today, the Wyoming Stock Growers Association is sponsoring the “Making A Plan” workshop at the Parkway Plaza Hotel and Convention Centre in Casper for those in the industry. In the 1970s when the federal estate tax reached as high as 70 percent, Ellis said, there were horror stories of ranchers who had to take out mortgages and loans to pay the estate tax just to stay in operation. Ellis would rather be tending to his livestock than writing a will, he said, but not doing so could mean losing the ranch.

There are a few ways to get around paying the full tax via gifting and annual exclusions. These methods are ways to pass on ranches to the next generation, but some of the exclusions could also expire Jan. 1.

Sen. Mike Enzi voted to eliminate the federal estate tax in 2006 and has voted to keep the rates as low as possible since. Rep. Cynthia Lummis supports keeping the current rates, but she wants to see the tax repealed.

“Being raised on a ranch and speaking with fellow ranchers in the state, I recognize and support the need for the death tax to be permanently repealed,” she said. “The most devastating consequence would be an automatic return to the old rate of 55 percent.”

Sen. Max Baucus, D-Mont., is leading the ag industry’s charge in Congress by making calls to keep rates at their current levels. Sean Neary, a Baucus spokesman, said Baucus is specifically working to protect families who want to pass down their ranches to the next generation.

The U.S. House voted for an extension of the current rates in July, but the bill failed in the Senate.

Sen. John Barrasso said if the tax rates increase, many Wyoming ranchers may have to sell. The Senate Republican Policy Committee, which Barrasso chairs, found that more than 24,000 farms and ranches nationally would be affected if the federal rate increases.

“If the death tax is increased, many of Wyoming’s farming and ranching families will be forced out of their livelihoods,” Barrasso said. “The ability of the family farm to pass from one generation to the next will be lost. Our country and our state cannot afford for this to happen.”

(13) comments

TBA
TBA

How many farmers and ranchers have gotten subsidies and money from the Game & Fish for so called damage by wildlife over the years? Why do these same farmers and ranchers post their land for no hunting or fishing when the only way to get to a fishing hole hunt area on public lands is across their land? I was raised on a ranch so I know what goes on with these problems much is the fault of careless hunters or fishermen who leave garbage or leave gates open,etc. The big problem is the rich people who think they are ranchers so buy up all they can to have for themselves and their out of state pals.There are few real farmers or ranchers anymore who have not jumped on the subsidy wagon,so no sympathy here if their kids have to pay more taxes,most young people won't work anymore so smaller farms and ranches are disappearing to corporate bigots.

conservation know it all
conservation know it all

TBA, you might be able to say the rich prick thing about Jackson, Sheridan, some in the Black Hills and maybe some mountain country around Douglas, maybe Casper mountain country. The vast majority of ranchers and farmers in Wyoming AND THEIR KIDS bust it all the time doing what they love to do. Some farmers and ranchers post their land for no hunting for the same reason you don't want random neighborhood families walking through your living room, many, maybe even most, just don't respect your house as much as you do. There is nothing wrong with a rich person buying land, they likely made that money themselves and are free to spend it how they want. I would prefer that more families living on smaller parcels could make it work, but I am a much greater advocate for freedom. So don't be jealous of the rich person, do what they did and go out and build your own wealth. The death tax is in my opinion the most unjust tax there is. All that wealth that a person built over his/her lifetime and over 1/2 can't go where he/she wants it, that's ridiculous. Even worse the money is confiscated for use by an entity (federal and state government) that is inherently wasteful and has no concept of effective money stewardship. The philosophy here is to take money from some of the best stewards in the U.S. (farmers/ranchers) and hand it to the single worst example of stewardship in North America, our federal Government.

TBA
TBA

I understand your side,quite well,been there and done that,but either the glass is half full,or it's half empty,but I stand by my comment about many farmers and ranchers abusing the subsidy debacle.Explain why so many younger folks don't want to farm or ranch anymore rather than sell off the land their parents worked for.I have seen it many times and I do realize there are many who truly try to make it,but I see also too many giving up,not willing to put the effort in.Must be a generational thing because I came from post WWII and I was taught and raised quite different than the kids in the last 40 years have been.Also explain why Game and Fish cater to ranchers and outfitters so much since they all seem to be in the sack together anymore.

Panhead
Panhead

A little light on the subject for those of you that think that all ranchers are rich. I am a fourth generation wyoming resident that inherited a ranch from my father, a ranch that I worked the biggest part of my life up until I had to go to work for someone else to keep the ranch going and survive. We have never taken a government subsidy or government money of any kind. We have worked our a$$es off to make ends meet. Yes we have some good years that are set aside by bad years. This ranch has been in our family for over 120yrs. I think the taxes have been paid more than once. We never turn away a resident hunter that bothers to ask permission and if you don't ask and get caught you will be asked to never come back, fair is fair right. Also we never give permission to nonresident hunters, we believe in our state and the people in it, maybe you should believe in us.

at0mic
at0mic

Not to mention Panhead that you put your a$$ on the line in service to your country !!

AnotherConcernedCitizen
AnotherConcernedCitizen

TBA... you have no concept what the real issue is here. You might want to rethink this view that you share. Look at the bigger picture. Read the comment- that immediately follows your comment and that person may enlighten you to what the real issue is here. Hint: Protection of property. Right to protect their freedom. Right to own property.

aggielee
aggielee

Right up front, I'm an outsider who doesn't live in Wyoming. I decided to read this article after I read the one re: 8th wolf wearing radio collar killed and yes I love animals. Now that's out of the way...I see merit in all the comments I've read so far. I also have had family in the small dairy bubiness in PA and I'm aware of Sam Donaldson owning a sheep ranch in New Mexico, to cite just a couple examples of where I'm coming from...The Land of the Free is losing farmers & ranchers of all kinds with maybe the exception being large corporate farms and ranches. We're losing wildlife all over the country. Much, not all, of this is due to large corporations and their $$$ to buy, it seems, whatever they want. I honestly believe that the differences I've read in the comments are differences that be combined to fight the real enemy...know your enemy...and God bless you...

carlover
carlover

with the stock growers association in town this week. you ranchers better pay close attention to the garbage they will be pitching to you, on conservation easements, meneral rights, water rights and the county just passed a storm water regualtion that they took federal moneys for and now have to give your water rights and your irragtion rights over to the epa to dictate how close your cows can come to water ways, and that includes the water on your own land. your being dooped into tax breaks that only end with you losing your lands when they decide its a habitate for birds, or something. a corridaor for wildlife, estate tax breaks come with strings. get informed john birch society can give you the low down on this bullchit they will present to you this week.

conservation know it all
conservation know it all

I looked up 4 ranchers from Wyoming that I know personally on the farm subsidy website http://farm.ewg.org all make their living from production agriculture and nothing else.

I wanted to see what you were talking about when you talk ranchers getting subsidies. I found that 1 of the 4 received no subsidies from 1995 to 2011 and the other 3 received yearly averages ranging from about $500 to a little less than $2600. The $2600 guy farms also and the majority of that was for corn subsidies. I'm certainly not for subsidies, and farmers get a lot of subsidized money, but I don't think $0-2568/year average is much for a rancher who earns his living from cattle. I'm not justifying it and I think they should automatically donate that money to a charity, but I don't think you should call that abuse of the subsidy debacle, at least when we are talking Wyoming cattle producers. Corn and wheat farmers are a different story. Part of the reason I'm with you on hating subsidies is that when farmland is subsidized, it takes a lot of the risk out of the endeavor, when risk is averted, it makes the land investment worth more and drives up land prices, so a younger guy has a hard time raising the capital to ranch.

When you are talking about the generational thing, that is a completely different story, I think you would find that most ag kids in the west are harder workers than their urban counterparts.

When you look at the average price of a Wyoming ag property of 16.3 million, (I'd say the median in this case is significantly less than the mean, but I'll go with the figures given in the article) minus 2 million, the 14.3 million has an inheritance tax bill of about $7.9 million, that would be daunting for the next generation when you consider the land value is overvalued when trying to make it out of a cow and potentially pay off a $7.9 million note, not including operating costs and cattle costs. Nothing will drive young families out of farming/ranching faster than this.

I don't know anything about the G&F, it's like any profession, there are guys that are easy to get along with and other guys that are total jerks who want to abuse their power. The ranchers I know are not in the sack with the G&F, but that's only anecdotal, not unlike your statement.

67XL
67XL

From 1995 to 2011 American taxpayers gave, to WY farmers and ranchers $732 million dollars! I would propose, for those farmers and ranchers who have taken these payments, that their estate tax obligation would be 107 per cent of all of the farm payments they have received. The taxes could be used to pay off the national debt.

For those receiving Federal payments a condition should also be that they allow public access to those lands receiving payments.

For those farmers and ranchers not receiving Federal payments they would be exempt from Federal estate taxes.

conservation know it all
conservation know it all

67XL, if the debt is 16 trillion dollars, then paying $783,240,000 towards the national debt will still make the debt $15,999,216,760,000. Just have some perspective.

I'm sure you read on that website that "SEVENTY FIVE PERCENT of farms in Wyoming did not collect subsidy payments - according to USDA. Ten percent collected 63 percent of all subsidies. Amounting to $408 million over 17 years. Top 10%: $19,263 average per year between 1995 and 2011. Bottom 80%: $749 average per year between 1995 and 2011." The 2nd largest payment category is CRP, which we know pays people to do nothing and is the most maddening category of all of them.

I would be totally for allowing public access to anyone's land if they receive federal payments, but are you going to also allow public access to a person's house that receives government aid?

That would be awesome if farmer's and ranchers who did not receive any federal payments had an estate tax exemption. It is probably more likely to be the other way around though with our crazy mixed up government's way of thinking. That is, the government is more likely to say to ranchers if you shun your dignity and take a subsidy, we will not have estate taxes on your property.


67XL
67XL

You started the argument on this thread,but you can NOT deny that many do get farm subsidies at a time when the economy is bad,and even when it was good.The point is,if they need that much help,they are in the wrong business,since the rest of us,most that is,do not get any help like farmers and ranchers do. We all have to suck it up,you folks are no different.

conservation know it all
conservation know it all

67XL,I don't deny that ag producers get subsidies, in fact, I believe I noted that 25% of ag producers in Wyoming get subsidies. I thought I made it very clear I am against any subsidies in a good or bad economy. I agree, if they need the subsidy they should get out of the business. I'm not arguing with you, subsidies are a useless waste of resources. Private insurance should be the honorable alternative and programs like CRP should be completely eliminated. Any federally funded conservation programs should be eliminated, they are wasteful.

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