Rural Democrats urge protections from tax increases for family farms

A group of House Democrats who represent rural communities are urging leaders in the chamber to ensure that family farms aren’t hurt by legislation based on President Biden’s proposed tax increases.

The rural-district lawmakers are concerned about Biden’s proposal in his American Families Plan to tax capital gains at death. The White House has said that this proposal will include exemptions for family farms and businesses in certain circumstances, and the lawmakers want to make sure that such an exemption is included in legislation.

“The repeal of stepped-up basis for capital gains and immediate taxation could especially hurt family farms, some of which have been in families for generations; therefore, we strongly urge you to provide full exemptions for these family farms and small businesses that are critical to our communities,” the lawmakers wrote in a letter Thursday to Speaker Nancy Pelosi (D-Calif.), House Majority Leader Steny Hoyer (D-Md.) and House Ways and Means Committee Chairman Richard Neal (D-Mass.).

Thirteen lawmakers, led by Reps. Cindy Axne (D-Iowa) and Jim Costa (D-Calif.), signed the letter.

The rural-area lawmakers aren’t the only group of Democrats who have been urging lawmakers to take into account issues of particular importance to their districts when crafting legislation based on Biden’s economic recovery plans; another group of lawmakers from high-tax states such as New York, New Jersey and California want legislation to include repeal of the cap on the state and local tax deduction.

Democratic leaders will likely need to take lawmakers’ geographic-related interests into account when they craft legislation. They will need the support of nearly every Democratic lawmaker, given that Republicans are expected to oppose bills based on Biden’s plans and Democrats have narrow majorities in Congress.

Biden last week released a $1.8 trillion proposal focused on child care, education and tax credits that benefit low- and middle-income households. He’s proposing to pay for the plan through tax increases on high-income households.

One element of Biden’s proposed revenue raisers is to tax capital gains above $1 million at death. Currently, people can give investments to their heirs without the assets being taxed at their time of death, and when the heirs sell the assets, they don’t have to pay capital gains taxes on the value that the investments appreciated before they received them.

The White House said that this proposal would help to prevent billions of dollars in investment income from escaping taxes. The administration said the proposal will include protections to prevent family farms and businesses from being taxed when passed down to heirs who continue to operate them.

The Agriculture Department said in a statement last week that estimates show that more than 98 percent of estates with farms won’t owe any tax under Biden’s plan if the farm is passed down to a family member.

The rural-district Democrats said in their letter that they support many of the concepts in Biden’s families plan, including raising taxes on wealthy Americans. But they said they are concerned that there could be unintended consequences for family farms and businesses if changes are made to the tax treatment of assets passed down to heirs.

“Farms, ranches, and some family businesses require strong protections from this tax change to ensure they are not forced to be liquidated or sold off for parts, and that need is even stronger for those farms that have been held for generations,” they wrote.

The lawmakers urged Pelosi, Hoyer and Neal to work closely with them as they work to craft protections from the capital-gains tax changes for farms and family businesses.

“We would ask that you work closely with representatives of rural districts like us to ensure those protections are well executed,” the lawmakers wrote. “Many of our constituents started working on their family’s farm when they were children, or built their farm with the intention of passing it on to their relatives, and we must ensure that their kids or grandkids are able to continue working that land for future generations.”  

–Updated at 1:08 p.m.