Biden tax plan puts U.S. farms at risk, says Boozman
Farmers could face huge tax bills if President Biden succeeds in raising capital gains tax rates and eliminating a loophole for inherited assets such as farmland, said the senior Republican on the Senate Agriculture Committee. The proposals are unpopular in farm country and some Democrats in Congress, including the chairman of the House Agriculture Committee, say family-owned farms and small businesses must be protected from the potential tax increases.
The White House says heirs would not have to pay capital gains taxes if they keep the farm or business in operation. A USDA analysis says 98% of farm estates would not owe any taxes in that instance and tax liability for the remainder would be on their nonfarm assets.
In an essay published by Fox News, Arkansas Sen. John Boozman said the administration was “indifferent” to farmers’ concerns about changes in the tax code. “Agricultural farmland values have increased by an average of more than 360%, or nearly $2,500 an acre, since 1990,” wrote Boozman, the Republican leader on the Senate Agriculture Committee. “That means farmers and ranchers likely would face steep capital gains taxes upon sale of an inherited asset if the step-up in basis is eliminated.”
Farm-state Republicans were expected to expand their attack on Biden’s tax package on Tuesday.
A key issue is the so-called step-up in basis, a feature of the tax code for decades, which says assets will be appraised at current value when inherited, rather than their gain in worth since they were acquired, which significantly reduces tax liability. The loophole “allows the wealthiest Americans to entirely escape tax on their wealth by passing it down to heirs,” said the White House. Biden says his plan would tax wealth at the same rate as income from work.
Elimination of stepped-up basis combined with a higher tax rate on capital gains would increase federal tax revenue by $113 billion over 10 years, said a Penn Wharton analysis, much less than some estimates. “Avenues for legal tax avoidance limit the revenue-raising potential of capital gains taxation,” it said.
House Agriculture chairman David Scott said early this month that he has “serious concerns” that the tax proposals “could hurt our family farmers, ranchers and small businesses. In particular, the ‘step-up in basis’ is a critical tool enabling family farming operations to continue generation to generation.”
More than 90% of the large-scale producers who took part in a Purdue University survey in May said they were “somewhat” or “very” concerned about possible elimination of stepped-up basis for inherited land. They had the same level of concern about possible changes to the estate tax. The largest U.S. farm group is campaigning for repeal of the estate tax.