Estate Taxes Biting American Businesses Despite Shale Income

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The sudden influx of money to rural farms from the shale gas revolution is a mixed blessing for American farmers, according to a new report by National Center for Policy Analysis research associate Mike Gajewsky. The money could be subject to the estate tax. “The estate tax, often called the death tax by opponents, is ineffective in reducing inequality,” says Gajewsky. “It does, however, excel at destroying family business and stifling economic growth.”

Faced with the prospect of cash-flow problems and paying taxes, many asset-rich and cash-poor families, such as owners of family farms and businesses, are forced to sell assets to pay the estate tax. This often results in corporate consolidation. And while the shale gas revolution has created economic booms in several states, the sudden increase in wealth has complicated estate tax calculations.

First, the discovery and exploitation of shale gas deposits has increased the value of farmland; the royalties paid to landowners are often used for capital investments on properties, increasing tax valuations; and the influx of money into the local economy, paired with extraction taxes on natural gas, has increased the local tax base in many rural counties, spurring infrastructure investments that further increase the value of local land.

“It is a mistake to assume that the uber-wealthy are the only people facing the possibility of paying the estate tax,” asserts Gajewsky. “With farms in Pennsylvania and Texas experiencing 10% or greater increases in household wealth, the estate tax is a continuing threat to farm families’ ability to pass their farms to their children.”

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