Extension of Tax Cuts on the Line as Congressional Leaders Meet with the President
December 1, 2010
The Forest Landowners Association (FLA) watched closely as President Obama sat down with Republican and Democratic congressional chiefs yesterday for the first time since the GOP’s Election Day gains, with the impending expiration of the Bush tax cuts as part of their agenda.
Though many issues are facing Congress in the lame-duck session, the tax cut issue was the focus at the rare meeting in Washington. All congressional aides were asked to leave the meeting, as the leaders sought common ground in an effort to move forward.
President Obama said that he thought it was a productive first step in what was a cordial bipartisan meeting. He noted that they sought the same goal of lowering taxes on Americans, but added that there remain key differences in how this goal can be accomplished. He also said that he expects more discussion on the subject before the issue is resolved.
Two key issues for private forest landowners:
Our forestlands provide 49 percent of the nation's timber supply and 53 percent of outdoor recreational opportunities. U.S. Forest Service research indicates that “…2 million acres of forestland must be harvested and over 1 million acres must be sold each year to pay the federal estate tax. Of the acres that are sold, it appears that several hundred thousand each year are converted to other, more developed, uses…” The death tax provides a disincentive for heirs to retain their family forest businesses or to continue to sustainably manage their forests, even if not sold. Over the last 15 years, members and staff of FLA have worked to repeal the onerous tax on estates triggered by death.
Capital Gains Tax
Before the Bush-era reductions, a 20 percent (and higher) long-term capital gains tax rate discouraged new investment and reinvestment in timber production. Timber farming is a cost intensive operation, and there are many years in which it produces no income at all. Long-term investment in forestland requires substantial return on investment when timber is finally harvested and sold.
Income taxes, capital gains taxes, alternative minimum taxes, and dividends taxes are all among the taxes that were lowered during the George W. Bush era. The outcome of the tax debate will certainly have an impact on every American.
To learn more about these issues, or others affecting private forest landowners, please contact Frank Stewart at FMS@Washington-Resource.com or (703) 549-0347.