House Agriculture Chairman David Scott, a Democrat, says Biden’s proposed tax increase will “make it more difficult for young, beginning, and socially disadvantaged farmers to get into farming”

https://www.rollcall.com/2021/06/02/house-agriculture-chairman-opposes-key-plank-of-biden-tax-plan/

House Agriculture chairman objects to Biden inheritance tax plan

Scott says capital gains change would increase obstacles for young, beginning and disadvantaged farmers

June 2, 2021

House Agriculture Chairman David Scott objected Wednesday to President Joe Biden’s proposal to change the capital gains taxation on inherited property, signaling growing opposition among farm-state Democrats to a change Biden hoped would help to fund sweeping domestic spending proposals.

Scott, D-Ga., in a statement called the proposal to tax capital gains at the time of a person’s death “untenable” and said exemptions that would allow farmers and ranchers to delay tax payments on intergenerational land transfers are inadequate.

“Any increase in inheritance tax for those taking over farm land is untenable and will further strain a farm economy that is just now beginning to recover from the strain of the pandemic,” Scott said.

In a letter to Biden Wednesday, Scott said he supported the president’s goals, but said the tax proposal could impose significant tax increases on farmers, ranchers and small businesses in rural America.

“The potential for capital gains to be imposed on heirs at death of the landowner would impose a significant financial burden on these operations,” Scott wrote.

“Additionally, my understanding of the exemptions is that they would just delay the tax liability for those continuing the farming operation until time of sale, which could result in further consolidation in farmland ownership. This would make it more difficult for young, beginning, and socially disadvantaged farmers to get into farming,” he said.

Biden would pay for part of his $1.8 trillion paid leave, child care and education proposal by nearly doubling the top capital gains rate on millionaires and eliminating stepped-up basis, which resets the value of inherited property to market value at the time of the original owner’s death.

Under Biden’s proposal, heirs who inherit assets of more than $1 million per person would have to pay capital gains taxes on the full appreciation in value from the time the original owner purchased the assets, in some cases many decades earlier.

The proposal, which was detailed further in the president’s fiscal 2022 budget request released May 28, would allow family-owned and -operated businesses, like farms, to defer payment of the tax until they sell the business or no longer operate it. And taxes owed on non-liquid assets could be paid off over time under a 15-year fixed-rate payment plan.

Treasury estimates that Biden’s capital gains tax increases would raise $322.5 billion over 10 years.

Scott’s letter comes nearly a month after 13 farm district Democrats in May wrote Speaker Nancy Pelosi, D-Calif., Majority Leader Steny H. Hoyer, D-Md., and Ways and Means Chairman Richard E. Neal, D-Mass., to warn that changing the stepped-up basis for capital gains could lead to taxes that long-time family farms couldn’t afford.

The lawmakers, led by House Agriculture Committee members Jim Costa, D-Calif., and Cindy Axne, D-Iowa, called for “full exemptions for these family farms and small businesses that are critical to our communities.”

The Democrats also drew a distinction between the “administrative difficulties” of taxing farm assets and taxing other inheritances that are easier to value, such as shares of stock. The stocks have a clear price for valuation and capital gains are simple to administer, they said, adding that farms, machinery and some small businesses may be illiquid and hard to value.

Selling stock to pay a tax bill also has less far-reaching consequences than breaking up land holdings in families that use that land to earn a living, they said. Farm operations could be left less viable by those changes, the lawmakers said.

Biden’s proposal seeks to address some of the concerns about administrative difficulties in valuing inheritances. He proposes a deduction for the full cost of appraising the assets and allowing Treasury to issue safe harbor rules in cases where complete records needed to conduct an appraisal are unavailable.

The American Farm Bureau Federation and agricultural financial advisers raised red flags in March as Democratic members of Congress floated tax changes similar to the ones Biden eventually called for. Republican lawmakers also have argued against the proposed changes.

June 3, 2021. Tags: , , , , . Economics, Joe Biden.

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