"A lot of businesses are asset-rich and cash-poor. A lot of farms are like that," said Steve Jany, 61, a grain farmer in West Windsor, N.J. "If it went back to the way it was, it would be disastrous for most farms in New Jersey."
The pre-2001 levels would reappear in 2013 only if Congress and President Obama cannot agree on a new framework. Republicans in Congress oppose higher estate taxes. Obama has suggested raising the estate threshold to $3.5 million, with a tax above that of 45 percent.
Andrew Frankenfield, agricultural educator in the Montgomery County office of the Penn State Extension, said Pennsylvania farmers seem to be taking a wait-and-see attitude.
"It's not a hot topic as of yet," he said.
But the American Farm Bureau, which lobbies on behalf of agricultural interests, is pressuring members of Congress to leave the estate tax at current levels.
"It's a very big issue for us," said Peter Furey, the group's New Jersey office director. "In general, farm owners have real estate and equipment that have an asset value far above an ordinary small business. You have a barn with equipment inside it, and trucks that move the produce, and tractors that farm the ground. We are asset-rich small-business people."
Furey said that if the federal government was intent on raising the estate tax, it should consider an exemption for family farms.
Pennsylvania, which also charges an inheritance tax, exempted family farms this year. The state-level tax is 4.5 percent for children of the deceased, 12 percent for siblings.
New Jersey has a graduated inheritance tax. It makes no special allowance for farms. Furey noted, however, that, unlike Pennsylvania, New Jersey lets an estate pass from a parent to child without taxation. He said that provision "is well-suited to the family-farm situation."
The federal-tax dollar threshold does not take into account the different value of land from region to region, and that makes it even more troublesome for farmers near metropolitan areas, farm advocates said.
In South Jersey and Southeastern Pennsylvania, for example, land values are far above those in many other areas.
"Just the land itself could very easily surpass $1 million," said Keith Dickinson, a farm financial management expert in the Chester County office of the Penn State Extension. "The income from the farm may not lead you to believe it's worth that much."
Jany said Mercer County farmland he bought in 1977 for $2,200 an acre would probably be worth from $20,000 to $25,000 per acre had he not extracted some of the sale value by selling development rights.
Across the Philadelphia region, thousands of farms have disappeared over the decades for many reasons, but one is the windfall farmers can reap from a sale to a developer. Frankenfield noted that in Montgomery County, only 200 to 300 working farms may be left.
Farm advocates said a higher estate tax will not slow that trend.
Contact Tom Infield at 610-313-8205 or firstname.lastname@example.org, or follow on Twitter @tinfield.