Farmers could be facing a huge tax increase should Biden be successful in raising the capital gains tax as planned. The plan calls for eliminating the loophole for inherited assets, like farmland, a senior member of the Senate Agriculture Committee said. Needless to say, the proposal is unpopular with members of Congress who represent many of the nation’s farmers, including some Democrats, the chairman of the House Agriculture Committee being foremost among them. In a recent interview, he reaffirmed his commitment to protect small businesses and family-owned farms from such a destructive tax increase.
But the White House refuted those allegations stating that heirs wouldn’t have to pay the capital gains tax should they decide to keep the farm and continue operating it. A USDA report seems to back up the White House’s contention stating that an estimated 98% of farms would owe no capital gains taxes under the president’s new bill and that any new taxes assessed against them would be directed at their non-farm assets.
But, in an essay published on Fox News, Sen. John Boozman, the Republican leader of the Senate Agriculture Committee, accused the Biden administration of being indifferent to farmers’ fears concerning changes to the tax code. According to the article, “agricultural farmland has increased in value by an average of more than 360 percent, or almost $2500 an acre, since 1990.” This means that farmers are likely to incur steep capital gains taxes should they decide to sell their inherited assets, if the Biden plan goes forward.
On Tuesday, farm-state Republicans are expected to step up their attacks on the Biden plan.
One of the major sticking points for Republicans is the so-called “Step-up in basis,” a mainstay of the tax code for several decades now, which states that assets will be appraised at current value, rather than the gain in value since the assets were taken over, which represents substantial tax savings. The cavernous loophole “allows the wealthiest Americans to escape tax liabilities on their wealth entirely by continuously passing their assets down to their heirs,” the White House stated. President Biden said his plan would in effect tax wealth at the same rate it does wages for working people.
According to a Penn Wharton analysis, elimination of the Stepped-up basis, combined with a higher tax rate on capital gains, would increase federal tax revenue by 113 billion dollars over 10 years. Legal tax loopholes like the stepped-up basis limit the government’s revenue-raising potential available to them by modifying the capital gains tax, the analysis concluded.
Concerns that the new tax proposals would adversely affect farmers, ranchers, and small business owners were echoed by House Agriculture Chairman David Scott earlier this month. He contended that the stepped-up basis tool was crucial for enabling family farmers to continue operating from one generation to the next.