Many people are talking about the tax proposals from President Biden. Farmers have been very vocal about their concerns. While many urban residents in the middle and lower classes might be excited about “taxes on the rich”, rural residents are trying to plead their case that these tax increases would bust them.
Farmers usually are considered “asset rich and cash poor.” That means that farms have a lot of taxable value, but the profit margins on these businesses have been historically low. Even the best-run operations are making only a small profit after covering enormous expenses.
Getting into farming is not easy or cheap. If you are fortunate enough to have an operation passed down to you, you still must contend with the cost of purchasing the land and equipment from a family member and those prices aren’t cheap. Inheriting the land doesn’t make it any cheaper, because there are inheritance tax rates, based on the value of the land. This is why there are so many concerns with not burdening the family farmers who take over the operation or penalizing a family who is going through succession because of a death in the family.
President Biden is open to protecting family farmers in his plans to eliminate the stepped-up basis in the tax code. However, the difficulty isn’t in wanting to do it, the hard part is getting it done.
American Farm Bureau Federation Senior Congressional Relations Director Pat Wolff says the current plan, known as the American Families Plan, includes tax code changes that, in the current version, will be harmful to family farms.
Right now, there is a promise that farms that meet certain criteria will be exempted from the so-called “death tax.” That is according to a meeting that AFBF President Zippy Duvall had with Agriculture Secretary Tom Vilsack.
Again, a promise is one thing and action is another. That is why organizations are stepping up their conversations with the administration about this tax issue. Wolff says that they are cautiously optimistic that the Administration will come through on its promise.
Of course, all this hinges on what Congress and the President actually do.