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Questions abound about the $3.5 trillion budget reconciliation plan being considered by Congress, chief among them for farmers is how policymakers will pay for their proposals. This spring, the Biden administration proposed changes to the tax code to pay for the American Families Plan raising concerns in the agricultural community that Congress may place burdensome taxes on family farmers to pay for the initiatives.
The concerns are focused on whether Congress will eliminate stepped-up basis, which is an important provision in the tax code that allows capital gains taxes to be based on the value of property at the time it was initially acquired. As farming is an incredibly capital-intensive business, stepped-up basis has allowed corn growers and other farmers to pass family farms to relatives without crippling them with high taxes that could force them to sell the family farm.
“Farms are often passed down from generation to generation,” said National Corn Growers Association President John Linder. “These family farmers have long produced crops that feed Americans and provide consumers with affordable and environmentally friendly fuel. Increasing capital gains taxes on farmers could close independent family farms across the country, a move that would be felt by all Americans.”
With 29,968 farms and ranches in the state, South Dakota would feel the economic impact if stepped-up basis were eliminated.
Experts say these local impacts could land a blow to the U.S. economy. The Family Business Estate Tax Coalition released a report this year that showed that eliminating stepped-up basis would negatively impact the nation’s gross domestic product and lead to a loss of 80,000 U.S. jobs each year and a reduction in worker wages.
“Agricultural interests generally, and corn farmers in particular, are important to state and local economies,” Linder said. “If these farms are shuttered because families can’t afford to pay capital gains taxes, local economies will feel the impact.”
Residents of rural communities must take action to help preserve stepped-up basis, Linder noted. The National Corn Growers Association is encouraging people to write their members of Congress on the issue. Those wishing to write letters can access contact information and proposed language here.
Congress will renew debate on the plan when it returns in September.
Content provided with support from the National Corn Growers Association.
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