If the country were to fall off the fiscal cliff, we were told, there were going to be some winners and losers. Some of the scheduled spending cuts got a lot more attention than others; the ones that were to affect the military, for example, were always a much more important media story than cuts to social programs that largely benefited the poor.
But CBS Evening News (12/28/12) found a different kind of of fiscal cliff victim: people who inherited land worth millions of dollars.
The cliff drama wasn’t just about income taxes, explained anchor Jeff Glor: “Estate taxes paid by those who inherit property will also jump.”
And correspondent John Blackstone found evidence–a guy who owns a 120-acre vineyard in Napa Valley. So what’s the problem? Blackstone explains that “much of the land he grew up on is gone, sold to pay estate taxes after his grandfather’s death.”
That happened in 1972, “when estate taxes were at an all-time high, 77 percent.” So the family sold 150 acres–leaving them a mere 120 acres. What does any of this have to do with right now? Well, the couple who inherited this land would like to pass it down to their kids–a dream that could be, as Blackstone puts it, “ruined by the fiscal cliff.” The fear, according to Blackstone, was that “the estate tax rate would rise from 35 to 55 percent on estates worth over $1 million.”
Given the land is currently valued at $8 million, that sounds like it could turn into quite a liability. The current owner of the multimillion dollar vineyard pointed out that they’re not really all that wealthy, since “it’s all in the dirt. You know, we’re dirt rich, cash poor.”
Some basic estate tax facts would have been helpful for CBS viewers. For starters, this is a tax by a tiny sliver of population–0.29 percent of estates would face any tax at all in 2013, according to the Center on Budget & Policy Priorities. The estate tax has fallen considerably since 2001, when it was the much-feared 55 percent. And most importantly, the amount exempted from the estate tax has increased over the past dozen years. As of last year it was $5 million per person (and thus $10 million per couple).
Family farmers have further protections under estate tax law, making it highly unlikely that
There was never a serious chance that the estate tax would have wound up at 55 percent with a $1 million exemption–Democratic leaders weren’t pushing anything like that at all. The deal that was reached at the last minute locks in a 40 percent tax rate with a $5 million dollar exemption (which will rise over time, since it is indexed for inflation).
In other words, the millionaire vineyard owners are going to be fine.
Of all the potential tax increases or spending cuts that were part of the “cliff” drama, the tax rate on inherited millions would seem to be an odd place to focus one’s concern.