By Julie Tomascik
Editor

Farmers, ranchers and small business owners are a key economic driver for the U.S., but the Biden administration’s tax proposals could put that at risk.

Texas Farm Bureau (TFB) President Russell Boening testified April 18 before the U.S. House Committee on Small Business, stressing the need to continue stepped-up basis and to eliminate the estate tax, also known as the death tax.

“President Biden’s budget puts farmers, ranchers and small businesses squarely in the crosshairs,” Boening told the committee. “For instance, the president’s budget calls for elimination of stepped-up basis and doubling the rate capital gains are taxed.”

These changes, combined with the proposed revisions to the death tax law, would result in over $280 billion in tax increases over the next two decades.

Farmers and ranchers continue to navigate challenges such as high input prices, inflation, extreme weather and volatile commodity prices. Taxes, liked the tax proposals from the Biden administration, shouldn’t be another worry, Boening said.

And with an aging demographic in agriculture, a significant amount of land is expected to change hands over the next decade.

“Any additional tax burden on them would put our national food security at risk, increase consolidation and make America more reliant on foreign countries,” he said.

Political unrest or natural disasters thousands of miles from American shores could drive up food prices and availability, highlighting the need for a strong American agricultural economy that doesn’t include increased taxes.

Boening, a fourth-generation farmer and rancher, has been fortunate to continue farming his family’s land. Taking away stepped-up basis, he noted, would devastate his family and many other farm and ranch families across the country.

“Stepped-up basis has helped us pass our land from one generation to the next because it values the farm at the time of inheritance. If this tool is eliminated, and I pass away, my children would be forced to pay taxes on appreciation from the previous generation,” he said. “The tax increases in the president’s budget proposal would leave our children with a tax bill that will likely leave them no choice but to sell the property.”

A growing Texas population also has driven land values to record highs while taking over 4 million acres out of agricultural production.

Many farmers and ranchers lease a large portion of their land from absentee landowners, many of whom inherited land from their own families. An unintended consequence of the repeal of stepped-up basis means farmers will likely lose those leased properties.

If the death tax is not eliminated, instead of spending money to improve their operations, Boening noted farmers and ranchers, along with small businesses, will be forced to continue to divert resources to pay for estate planning to account for a shifting and unpredictable tax code.

“To put it simply, death should not be a taxable event. Therefore, Texas Farm Bureau advocates for abolishing the estate tax, or at minimum, ensuring the current exemption rate set forth by the Tax Cuts and Jobs Act does not expire in 2025,” Boening said.

It’s already difficult to carry a family business forward through the third and fourth generations, but these inheritance tax proposals may make them impossible, he noted.

“Anyone who thinks the death tax only affects the wealthy are ill-advised,” Boening said. “Family farms and ranches are the building block for a secure America. We must fight for a tax code that provides certainty for their future—not one that puts them in jeopardy.”