Virginia's Estate Tax is an Unfair Burden on Farms and Businesses

Edd Houck
Free Lance-Star


DURING THE recently concluded 2003 session of the Virginia General Assembly, a bipartisan majority of both houses passed legislation to repeal Virginia's estate tax -- the tax on income, business enterprises and property imposed on family members when a loved one dies. This bill was subsequently vetoed by Gov. Mark Warner.

I am proud to say that I voted in favor of repealing the estate tax. This is a vote for economic recovery and fairness. It is a vote that will protect the numerous family-owned small businesses that dot Virginia's landscape.

Just as importantly, repeal of this tax will strengthen our family farmers and agribusiness professionals and preserve Virginia's increasingly threatened scenic vistas and open spaces.

Estate-tax repeal is a matter of fundamental fairness. The estate tax is an additional tax on income and assets that have already been taxed once.

Virginia's emergence from economic recession has been slow, painful and uncertain. Protecting small businesses and creating new jobs are essential to economic recovery. Continuing to tax Virginia's small businesses and family farms is unfair when 30 other states do not collect the estate tax and the federal government is in the process of abolishing it.

The last thing we should be doing in the current economic climate is to facilitate the closing of small businesses or relocation of those businesses to other states. It makes more sense to repeal the tax and help to spur renewed investment in small businesses across Virginia.

Farmland and open spaces throughout our nation are at risk. According to the U.S. Department of Agriculture, more than 11 million acres of rural land were converted to developed use over the past decade, and that rate is accelerating.

Some 98 percent of Virginia's farms are family owned or operated -- a total of 48,000 family farms. The ramifications of the estate tax on these farm families must be examined. Generations have worked this land, passed on to them from their parents and grandparents. Like their ancestors, most of their assets consist of the very land they work, the equipment they must buy to work the land, and other investments needed to operate a business.

Unfortunately, these non-cash assets are taken into account for tax purposes. For many family farmers, death and transfer to the next generation mean that heirs must often sell their land and equipment to pay the tax. Rapidly escalating property values, higher local tax assessments and increased development pressure only exacerbate this problem.

Tremendous population growth in Northern and Central Virginia over the past 20 years have made these family farms inviting targets for developers, and rapid growth has increased land values and tax rates.

Just this year, assessed property values in Culpeper County increased by an average of 35 percent. Higher assessments mean higher property taxes that must be paid. The sale of open space and farmland to developers becomes a very attractive option to heirs searching for means to pay the estate-tax collector.

I have worked over the past two decades with the Virginia Farm Bureau and Virginia Agribusiness Council on many initiatives, including the 'Ag Initiative,' a series of legislative goals designed to keep the maximum acreage of existing farmland in operation. And while we have made some significant strides, the estate tax continues to be an obstacle.

Virginia's historic areas, including battlefields and other places that celebrate our heritage, are also increasingly at risk because of growth and development pressures. Removing the estate tax will encourage private-property owners in these areas to keep their land intact by reducing incentives to sell acres of open space because of the need to pay tax bills.

All of Virginia, but especially Central Virginia, including Culpeper, Louisa, Orange, Madison and Spotsylvania counties, confronted record droughts last year. Gov. Warner declared a state of emergency, and water restrictions were put in place across Virginia. Loss of open spaces and continued growth threaten our rivers and streams and increase the demand for precious water resources. We can reverse this trend and help to preserve open spaces and natural resources through private incentives such as estate-tax repeal.

Growth and development have become contentious issues in many regions of our state, and I believe it is important to encourage free-market approaches to resolve these issues whenever possible. Protecting the rights of landowners and providing incentives for preservation are not mutually exclusive priorities. Repealing the estate tax is an immediate, common sense way to advance each of these priorities.

The General Assembly chose this session to eliminate a tax that is unfair to individuals and small businesses and provides obstacles to economic recovery. We sent the strong message to Virginia's farm families that we are taking immediate action to protect them and their way of life. Finally, we took a decisive step to preserve our state's natural resources and open spaces from development without restricting the rights of private property owners.

EDD HOUCK of Spotsylvania is a Democratic state senator representing the 17th District.