Farmers fear proposed changes to tax policy will devastate legacy farming. USDA just released its analysis of the impact of the Biden tax plan on family farms at the request of Republicans.
USDA based the numbers on capital gains tax model and found 81 percent of family farms would have no change to their tax obligations. The department originally said 98 percent of families would not be impacted.
More than 15 percent of small farms would have a deferred tax liability, but no bill due at death if the farm stays in the family. For mid-sized farms that number jumps to 64 percent.
USDA says that 1.1. percent of all family farms would owe a capital gains tax at death.
Those changes in capital gains and estate and transfer taxes could be used to pay for the $3.5 trillion dollar reconciliation bill. Zippy Duvall, the president of the Farm Bureau, expressed the concerns he has been hearing from the ag sector.
The House Ways and Means Committee protected stepped up basis in their mark-up of the Budget Reconciliation, but Duvall says the fight to protect farmers is not over.
“We feel like we’ve done a really good job talking about the disadvantages of what doing away with stepped up basis with the lowering of the exemption state taxes, but we know that we got a long way to go. Yet, a lot can happen in just a 24 hour, 48 hours in this town, and we want to make sure that doesn’t slip back in,” he states.
One of the trade-offs being offered in the American Family Plan from President Joe Biden would allow farms to defer estate taxes if their family keeps farming.
“We think that’s a very dangerous way to go about it, and we’re appreciative that they think about that, but to defer that tax is a tax liabilities going to hang over that farm until it is makes a transition, and that tax liability could very well be viewed from leaders and affect the opportunity to get operating loans and all the things that go along with it,” he explains.
Duvall says that even if agriculture gets an exemption, higher taxes on other businesses will still raise input costs and hit farmers on their bottom line.
According to Duvall, “Everything that we buy to produce to supply that food and fiber for this country, that is a big, big price tag. So, those taxes will roll back to the farm and it will be very expensive for us to be able to handle the increase in costs, because we already have tremendously increased costs-- every individual and Americans pay more for everything.”
Current math seems to add up to $66-90 billion dollars of support for agricultural programs in the budget, but Duvall says it comes at the expense of a $3.5 trillion dollar bill and $2 trillion dollars worth of tax increases.
“To me, all that doesn’t really match up when you try to narrow it down just what little bit in there is going to be for agriculture, even though they would be beneficial,” he adds.
American Farm Bureau wants to see the Reconciliation Bill in print, to read and evaluate the legislation before making a final determination, but Duvall says that, right now, it seems like they are on track to oppose the package.
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