The value of Nebraska farmland is skyrocketing, the fiscal cliff looms Jan. 1, and owners of an increasingly precious soil resource could be exposed to much higher estate taxes a month from now.

Unless Congress rises above its fractious ways, the estate tax exemption will plummet from $5 million each for a married couple to $1 million each.

There are several lawmaking scenarios for avoiding a collision between rapidly rising land prices and higher estate taxes that could play out sooner or later. But there’s no answer in place so far.

Bruce Johnson, agricultural economist at the University of Nebraska-Lincoln, cited a recent Nebraska Rural Poll as evidence of how much this matters.

“We found something like 20 percent of Rural Poll respondents had a direct tie to some type of agricultural land,” said Johnson, “so it’s part of their wealth and income portfolios.

“We’ve got to remember that the value of agricultural assets is spread pretty broadly across this part of the country,” he added, “much contrary to the thinking that Ted Turner is gobbling up the state.”

That asset is such a hot commodity right now that you almost can smell the smoke.

Back in the 1860s homesteading era, a newcomer to the York area could become the owner of 160 acres of fertile ground for free.

A few days ago, 160 acres in York County sold for $16,900 an acre, or about $2.7 million. As another indicator of how pricey prime agricultural real estate has become, that’s about $2.50 a square foot.

Johnson, who presides over the university’s annual land survey, is happy to provide some estate tax context.

A $1 million land asset from 10 years ago might be up to $3 million now. “And now, all of a sudden, as of Jan. 1, $2 million of that could be subject to the federal estate tax.”

That’s a 35 percent hit on sale proceeds above $1 million.

Johnson certainly is not the only one paying attention to a landowner’s dilemma.

Hastings attorney Adam Pavelka, a specialist in estate and business planning, said it was scheduled to be high on the agenda for the 50th anniversary meeting of members of the Great Plains Federal Tax Institute in Omaha on Thursday.

Meanwhile, Nebraska Sen. Mike Johanns called attention to what he described as “draconian policies” and to the prospect of both higher estate taxes and higher capital gains taxes in his weekly column.

“Farmers and ranchers, many of whom have had land in their families for generations, should not be forced to pay Uncle Sam more than half the value of their estate,” Republican Johanns said.

Pavelka said many Nebraskans might be able to agree on some middle ground between a $5 million and a $1 million exemption.

“But then, the cliff that we’re discussing here -- we’re going down to a number that will affect virtually any Nebraska client that owns any degree of real estate right now.”

Helping people plan their departures from the ownership structure is virtually impossible in these uncertain times, he said. “We’re shooting at a moving target.”

Some favor doing away with the estate tax entirely. Chuck Hassebrook of the Nebraska Center for Rural Affairs in Lyons is not among them. Nor is Hassebrook fond of the “train wreck” description for what could happen Jan. 1.

“First of all, the estate tax serves a very necessary purpose,” he said. “In addition to raising revenue, it serves as a barrier to wealth becoming very concentrated in the hands of a few.

“In doing that,” Hassebrook added, “it levels the playing field between those who were born to average families versus those born to enormous wealth.”

He wasn’t ready to say where he thinks the estate tax exemption should be. “My principal point is that we should have an estate tax credit that protects reasonable amounts of wealth. We ought to get rid of the more complex methods that people use to protect much larger amounts of wealth.”

Johnson conceded concerns about “a landed aristocracy,” but said typical farming operations in the state often include several people trying to earn a living for several families. It could be a father and two sons, for example, or three brothers.

No tax law should be constructed in such a way that taxes trump good economic decisions, he said. In the case of the estate tax, policy should not force sale of substantial portions of land assets to pay what’s owed.

“That might be pretty darned critical to maintaining that multi-family farm operation.”

But Johnson doesn’t favor abolishing the estate tax either.

Those with a stake in production agriculture in Nebraska get big opportunities from their agricultural holdings. “There’s a time to pay back. Come on.”

Hassebrook said the state already is caught up in a situation where the aggressive bidding that goes with the few parcels of land that come up for sale shuts out young people without well-entrenched farming parents.

“It becomes very, very difficult for them to buy land with any hope of paying for it by farming it.”

Reach Art Hovey at 402-473-7223 or at