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Advertise on the Tentacle

February 1, 2012

Keeping the Farm in the Family

Kevin E. Dayhoff

Legislation to address how Maryland estate taxes inhibit farmers from passing-down the family farm to succeeding generations has gained some much-needed interest in the current session of the Maryland General Assembly.


Last year, in spite of the support of Maryland Gov. Martin O’Malley, a similar initiative failed.


This year, all indications are that Governor O’Malley, a Democrat, and Maryland’s legislative leadership, including Sen. Ronald Young, (D., Frederick/Washington), Sen. Rob Garagiola (D., Montgomery), Sen. David Brinkley (R., Frederick/Carroll), Sen. Jim Mathias (D., Eastern Shore), and Senate President Thomas V. ‘Mike’ Miller (D., Calvert/P.G.) all support legislation to change how estate taxes are applied to Maryland’s number one industry – agriculture.


Although the General Assembly faces quite a number of contentious issues, including raising other taxes in this winter’s legislative session, according to an AP story carried by the Frederick News-Post January 26, all indications are that extending estate tax relief to farmers is gaining bipartisan support.


Numerous media reports, including that of Frederick News-Post reporter Bethany Rodgers in a January 27 story and a January 20 article by Jennifer Shutt of the Delmarva Daily Times, give much-deserved credit to Senator Young’s leadership in the pro-agriculture initiative.


The legislation is also supported by the editorial board of the Frederick News-Post. Currently farmers are “forced by the tax to part with some of the farm in order to keep the remaining portion. The fate of the acreage that would be lost is anyone's guess, but it would likely not remain farmland. We believe this is sound legislation and urge lawmakers to come up with a final version agreeable to both houses of the General Assembly,” noted the News-Post editorial.


“State leaders announced Thursday,” reports Ms. Rodgers, “that Democrats and Republicans are working together on estate tax relief for farming families, a measure that should help them pass their land down through generations and keep the fields from disappearing under roads and subdivisions…”


In the Maryland House of Delegates, the Frederick News-Post says Frederick Republican Del. Kathy Afzali (R., Frederick), is working on a similar bill.


Ms. Rodgers also observed that “Afzali, who introduced the same bill last session but did not see it pass, said with legislative leaders and Gov. Martin O'Malley backing the plan, she has high hopes that it will succeed this year…


“Afzali is editing her bill so all agricultural property would fall outside the estate tax as long as it stays farmland for 10 years…”


Ms. Shutt wrote that Senator Young said that “the goal is to keep people in farming both for the sake of farming and for protecting the land from development…We don't want someone forced out of farming because they can't pay the bill.”


Currently, “When a farm is sold to the next generation or to another farmer,” wrote Ms. Shutt, “the Maryland estate tax exempts the first $1 million value and taxes the new farmer 16 percent of the estate's value above that.


“Because the tax bill is due nine months after a farm is sold, farm families throughout Maryland often face tough decisions, which are directly tied to the size of their estate tax bill.”


In Ms. Shutt’s article, Valerie Connelly, the director of government relations for the Maryland Farm Bureau was quoted as saying that “we have found over the years many times (farmers) just sell the farm into development to pay the tax bill…”


“The 2011 proposal – and the bill now sponsored by Young – offered $5 million of exempted property and cut tax rates on additional property to 5 percent,” writes Ms. Rodgers for the News-Post. “Last session, state analysts reviewing Afzali's bill estimated the tax break would cost Maryland $2.3 million in lost revenue over the first fiscal year.”


However, in the long run, Maryland public policy that supports the agriculture industry saves taxpayers much more money than the short term “lost revenue” as a result of the much-need estate tax reform.


Estate tax reform is a step in the correct direction to addressing a number of stressors on the Maryland budget and the state’s economy. Much more reform is needed, but we’ll gladly accept and praise the current direction of Maryland’s leadership in addressing the daunting array of challenges being faced by the state’s agriculture and small business community.


Too much of Maryland’s taxation and regulatory policies, including onerous and expensive environmental rules and regulations, that do not take marketplace economies into consideration, paradoxically encourages growth in areas where the current predominant land use is agriculture.


To be certain, the big picture of encouraging succeeding generations to continue agricultural land use in rural areas of the state must be accompanied by a sustaining commitment by Maryland planners, regulators and bureaucrats, and state fiscal policy to support the business of agriculture and the maintenance and improvement of municipal infrastructure, which is woefully lacking.


In addition to the Maryland Farm Bureau, it would be wise for the Maryland Municipal League’s legislative committee to also support this estate tax reform initiative.


For the state to encourage growth in municipalities and yet deny local cities and towns the much-needed money to maintain and improve the necessary infrastructure to embrace growth is problematic.


As long as it is easier – and cheaper – to build houses in the middle of a cornfield, development pressures will continue to take place exactly where it is, in the long-run the most expensive for Maryland taxpayers to support.


It is one thing to provide dollar resources for ‘preserving’ farmland; however, such preservation efforts must be accompanied by initiatives to preserve the business of agriculture.


Maryland simply must re-double its efforts to provide regulatory and tax relief to the agriculture industry to encourage market forces that capitalize a good return on agricultural land use. It will save the state 10-fold in the long run.


Maryland’s governor, the leadership of Democratic Party, the General Assembly, and our local legislators are to be applauded for their efforts in support of Maryland agriculture, families, and small business owners.


. . . . .I’m just saying…


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