President Biden’s proposed tax hikes to pay for his massive infrastructure and social spending plans has unnerved many in farm country, just as Biden is winning buy-in for his climate change proposals.
Farm groups like Biden’s ideas on rewarding farmers for climate-smart conservation practice but proposed new capital gains taxes could undermine that support. American Farm Bureau President Zippy Duvall says, “a bright caution light is flashing,” on ending stepped-up basis and increasing capital gains taxes that could “punish” hardworking farm families. AFB tax adviser Pat Wolff says, “Farm Bureau’s position is that current law is the best way to help farms and ranches transfer at death. Under current law, all capital assets transfer without tax.”
Biden would instead impose a capital gains tax at death on gains of one million dollars, or two million per couple, essentially replacing the stepped-up basis, while the capital gains rate would nearly double for households with income over one million dollars. USDA says most farms will owe no tax if they stay in the family, but AFB isn’t sure, with Wolff stating, “This new proposal may allow that to happen, but it comes with a lot of strings and conditions, and we don’t know what those are yet.”
But one thing is known: a tax hike would allow Senate Democrats to again use the streamlined legislative procedure called “reconciliation” to pass Biden’s infrastructure and social spending bills with no GOP votes, provided all Democrats agree, which is not the case just yet.