Governor Corbett Abolishes Pennsylvania's Death Tax for Family Farmers

Pennsylvania Governor Tom Corbett, a Republican, signed a bill into law to eliminate the Commonwealth’s onerous inheritance tax for those who inherit their family’s farm.  The bill was approved by both houses of the majority Republican General Assembly. 

Pennsylvania’s inheritance tax had been reduced from 6% to 4.5% for lineal descendents under fellow Republican Governor Tom Ridge, but the phase-out of the “death tax” was halted under Democratic Governor Ed Rendell, who initiated a tax and spending spree.  The inheritance tax rate for siblings is 12% and for other heirs, the Commonwealth taxes inheritance at 15%!  What makes Pennsylvania’s rate especially burdensome is the lack of any exemption, meaning that the tax begins to apply from the first dollar inherited, unlike federal taxes or those of other states that only tax inheritance above a large threshold.  Now, those inheriting family farms will no longer pay any inheritance tax.

The owners of small family farms are often wealthy in land, but poor in cash. Thus, the death tax was significantly responsible for the large decrease in the number of family farms in Pennsylvania, as families had to sell all or parts of the family farm either to larger corporations or to real estate developers in order to pay the inheritance tax.  The loss of farmland and other open space has contributed to urban sprawl, with its resultant adverse effects on the environment, as well as a decrease in the availability of fresh, locally-grown produce. 

The movement in the Keystone State to preserve open space had helped to reduce the effect of the tax, while an increase in demand for locally-grown produce has led to a rise in the number of farmers’ markets that are making farming a more worthwhile enterprise.  Thus, the actions of the Legislature and Governor will not only improve Pennsylvania’s economy, but preserve its environment and quality of life.  It should also be noted that Pennsylvania farmers and other landowners in parts of the Commonwealth have been aided by royalties from natural gas drilling. 

There are many other businesses that, like farms, require land by their nature in order to produce goods or services.  Pennsylvania’s death tax thereby continues to burden many citizens who inherit their family enterprises, especially small businesses that have a relatively large amount of land, but not enough cash to pay the inheritance tax in order to keep the business in the family. 

Furthermore, the death tax, which taxes the inheritance of money that was mostly already taxed during the lifetime of the person who earned it, continues to burden all Pennsylvanians.  I call upon the General Assembly to continue to phase out the Commonwealth’s death tax.