Washington, D.C. – Today, Congressman Tom Emmer (MN-06) sent a letter to President Biden urging him to reconsider his proposed changes to the capital gains tax. President Biden has promoted an increase in the capital gains tax from 23.8% to 38.6%, removing the stepped-up basis, and imposing capital gains taxes on unrealized gains for farmers who pass away. These changes, if enacted, will have a significant impact on our agriculture community and more specifically, our family farms.
“President Biden’s proposed tax increases will hit every American in some form or fashion, but his plans for the capital gains tax will devastate family farms in Minnesota and across this country. Given the capital intensive and volatile financial nature of the agriculture industry, farmers and ranchers go to painstaking lengths to plan their finances – sometimes decades in advance - to ensure they can keep the farm in the family,” said Emmer.
“Family farms play a critical role in the way we feed, fuel, and clothe our country. Increasing the capital gains tax, eliminating stepped-up basis, and adding another tax at the time of death takes money that should be reinvested in the next generation of farmers and instead sends it to Washington’s coffers. Recognizing the many sacrifices our agriculture community makes to keep our country moving, I can only hope President Biden recognizes the very real and very harmful impact these tax increases will have on family farms in America,” Emmer concluded.
“Minnesota Farm Bureau appreciates Representative Emmer’s leadership and the support of the other members of the Minnesota delegation in their important outreach to President Biden urging him to support the continuation of stepped-up basis and to reconsider his plan to increase the capital gains tax. A farmer’s assets are invested in their land, buildings, equipment and animals. Family farmers don’t have the money on hand to pay large capital gains taxes and would be forced to liquidate assets—or even sell the family farm,” said Minnesota Farm Bureau President Kevin Paap.
Taxes on capital gains are paid following the sale of long-term capital assets. Farmers borrow and invest large sums of money in capital assets such as land, buildings, equipment, and livestock. Last year, farmland and family-owned property represented 82 percent of all farm assets, and in 2018, nearly 40 percent of farm families reported some capital gains or losses, compared to just 14 percent of average individual taxpayers. A step-up in basis is a formula in which the taxable value of an asset is adjusted when it is being sold or passed on as part of an inheritance.
On March 31, 2021, President Biden announced a suite of business tax increases as part of his transportation and infrastructure plan. The plan did not speak specifically to capital gains, however, reports indicate the Biden Administration is planning another round of changes to the tax code to fulfill promises he made during the 2020 Presidential campaign that included an increase in the capital gains tax to some of the highest rates in history, and the elimination of stepped-up basis.
An increase in the rate at which capital gains are taxed and elimination of stepped-up basis can stall new farm growth, diminish family-farm transfers, and lead to further consolidation within the agriculture industry.
Read the letter here.