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Because otherwise, prices crash, running all the small-time-to-medium farmers out of business, sending them to slums in big cities as they seek new opportunitie

Because otherwise, prices crash, running all the small-time-to-medium farmers out of business, sending them to slums in big cities as they seek new opportunities, their farms are bought up by large industrial agricultural firms that can afford to scale and survive the depressed price, and then capture regulation to serve their interests. It's a tale as old as agriculture... Damned if you do...

dmix 9y ago
It's funny you should mention lack of centralization causing small/medium farms to sell to big firms. I just read an article which showed how one of the great side effects of the last half century of US estate taxation (where the government takes ~30-50% of the estates wealth after the original owners dies) resulted is a massive centralization of farms to a few large companies. Basically farming in the US used to be 90% small/medium sized and largely family owned. Most farmers worked on their farms until they died and they left a decent business for their kids, not a wealthy one, but one that was sustainable to support a medium-large sized family - but also significant enough to cross the estate taxation barrier. When they die their various children are left with the choice of a) giving 50% of the estate to the government, selling half the farms assets to do so, and working hard on this smaller farm for the rest of their lives (and then to give their kids the same choice) or b) selling it all off to the highest bidder (aka one of the mega-farms), paying off the government tax, and moving to the city. They ALL pretty much chose b) (or sold half in a) to the big farms) and over enough generations we now have a massive oligopoly of a few companies owning all the farms. And this was in the name of making the rich 'pay their fair share'. While the mega-farm owners pay the same estate tax their estate tax doesn't translate into them giving up their mega farms which are controlled by a broad group of wealthy owners, likely engaging in your typical offshore tax evasion schemes to avoid paying their own. I also know within a few years of Venezuela centralizing food production it caused massive shortages in order to keep prices lower - well before the drop in oil prices pushed their economy into crisis. Otherwise I don't know enough about the farming industry to comment.
- jeffdavis 9y ago
  Interesting. Can you please share the article?
- deepnotderp 9y ago
  These may not be perfectly unbiased sources, but these say otherwise: https://www.cbpp.org/blog/the-myth-that-the-estate-tax-threatens-small-farms https://www.cbpp.org/blog/the-myth-that-the-estate-tax-threa... https://www.cbpp.org/research/federal-tax/ten-facts-you-should-know-about-the-federal-estate-tax https://www.cbpp.org/research/federal-tax/ten-facts-you-shou...
- hn_throwaway_99 9y ago
  Do you have a citation for that article, because I'm extremely sceptical estate tax is the main reason. You have to basically be very wealthy to pay the estate tax. Only one in 700 estates pay federal estate taxes today, and while the top rate is 40%, the average rate paid is 17% (https://americansfortaxfairness.org/tax-fairness-briefing-booklet/fact-sheet-the-estate-inheritance-tax/ https://americansfortaxfairness.org/tax-fairness-briefing-bo... ). Currently, a married couple needs to have an estate over $11 million before that pay any estate tax. I always thought liberals had very poor marketing with the estate tax: conservatives were very successful framing it as the "death tax" (a lot of people thought everyone had to pay it), while I always thought it should have been called the "aristocracy prevention tax". It's seems much more likely that smaller family farms wanted to cash out and move to the city because farming is pretty grueling work, a similar reason for urbanization all over the world.
- Simon_says 9y ago
  Honestly, that sounds like the estate tax working as intended. We would like to avoid a hereditary class of people who can inherit a valuable asset and an upper-middle class job to go along with it. It sounds great for that beneficiary, but it's not so great for all the other people who aren't born into such circumstances.
- imbur 9y ago
  When the owner of the property dies the heirs inherit it at the stepped up basis without having to recapture any of the depreciation. Even paying a 50% estate tax this is a substantial financial gain if the farm has been taking the tax credit for depreciation for 15+ years.

dmix 9y ago

It's funny you should mention lack of centralization causing small/medium farms to sell to big firms. I just read an article which showed how one of the great side effects of the last half century of US estate taxation (where the government takes ~30-50% of the estates wealth after the original owners dies) resulted is a massive centralization of farms to a few large companies. Basically farming in the US used to be 90% small/medium sized and largely family owned. Most farmers worked on their farms until they died and they left a decent business for their kids, not a wealthy one, but one that was sustainable to support a medium-large sized family - but also significant enough to cross the estate taxation barrier. When they die their various children are left with the choice of a) giving 50% of the estate to the government, selling half the farms assets to do so, and working hard on this smaller farm for the rest of their lives (and then to give their kids the same choice) or b) selling it all off to the highest bidder (aka one of the mega-farms), paying off the government tax, and moving to the city. They ALL pretty much chose b) (or sold half in a) to the big farms) and over enough generations we now have a massive oligopoly of a few companies owning all the farms. And this was in the name of making the rich 'pay their fair share'. While the mega-farm owners pay the same estate tax their estate tax doesn't translate into them giving up their mega farms which are controlled by a broad group of wealthy owners, likely engaging in your typical offshore tax evasion schemes to avoid paying their own. I also know within a few years of Venezuela centralizing food production it caused massive shortages in order to keep prices lower - well before the drop in oil prices pushed their economy into crisis. Otherwise I don't know enough about the farming industry to comment.

jeffdavis 9y ago
Interesting. Can you please share the article?
deepnotderp 9y ago
These may not be perfectly unbiased sources, but these say otherwise: https://www.cbpp.org/blog/the-myth-that-the-estate-tax-threatens-small-farms https://www.cbpp.org/blog/the-myth-that-the-estate-tax-threa... https://www.cbpp.org/research/federal-tax/ten-facts-you-should-know-about-the-federal-estate-tax https://www.cbpp.org/research/federal-tax/ten-facts-you-shou...
hn_throwaway_99 9y ago
Do you have a citation for that article, because I'm extremely sceptical estate tax is the main reason. You have to basically be very wealthy to pay the estate tax. Only one in 700 estates pay federal estate taxes today, and while the top rate is 40%, the average rate paid is 17% (https://americansfortaxfairness.org/tax-fairness-briefing-booklet/fact-sheet-the-estate-inheritance-tax/ https://americansfortaxfairness.org/tax-fairness-briefing-bo... ). Currently, a married couple needs to have an estate over $11 million before that pay any estate tax. I always thought liberals had very poor marketing with the estate tax: conservatives were very successful framing it as the "death tax" (a lot of people thought everyone had to pay it), while I always thought it should have been called the "aristocracy prevention tax". It's seems much more likely that smaller family farms wanted to cash out and move to the city because farming is pretty grueling work, a similar reason for urbanization all over the world.
Simon_says 9y ago
Honestly, that sounds like the estate tax working as intended. We would like to avoid a hereditary class of people who can inherit a valuable asset and an upper-middle class job to go along with it. It sounds great for that beneficiary, but it's not so great for all the other people who aren't born into such circumstances.
imbur 9y ago
When the owner of the property dies the heirs inherit it at the stepped up basis without having to recapture any of the depreciation. Even paying a 50% estate tax this is a substantial financial gain if the farm has been taking the tax credit for depreciation for 15+ years.