Biden Tax-Hike Exemption for Farms Pushed by Rural Democrats
(Bloomberg) -- House Democrats representing key rural swing districts laid down a marker on President Joe Biden’s proposed tax increases, urging that any final legislation maintain a promised exemption for farms from a crucial change in estate tax rules.
Thirteen Democratic lawmakers sent a letter Thursday to House Speaker Nancy Pelosi and other party leaders that underscores the sensitivity in agricultural regions to Biden’s push to end a long-standing inheritance tax benefit known as the step-up in cost basis. That currently wipes out the capital gains tax bills on assets when they are passed to an heir. The Biden plan would tax appreciation in the value of assets for estates worth $1 million or more.
Biden’s proposal includes an exemption for family farms and other small businesses. That would defer any tax bill for the capital gains on those farms as long as they remain family owned and operated.
But progressive lawmakers are pushing for even greater spending than called for in Biden’s $4 trillion worth of twin longer-term economic plans. And others are demanding a costly repeal of a cap on state and local tax deductions. As Congress takes up work on the legislation, the rural Democrats are now voicing their own demands.
“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,” the lawmakers wrote in the letter. “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.”
Some 82% of farmers are “very concerned” that Biden’s proposed estate tax changes will make it harder to pass their farm on to the next generation in their family, according to a Purdue University survey of 400 farmers taken last month.
Though the group stopped short of opposing any legislation that leaves out the exemption, it is an indication of a bottom line. Party leaders can’t afford to risk many defections given Democrats’ razor-thin control of the two congressional chambers.
“With this letter, I hope House leadership recognizes that there are a significant number of Democrats who will want to see this exemption included in any bill,” said Representative Cindy Axne of Iowa, who helped organize the statement. “While I won’t rule out voting against a proposal that doesn’t adequately protect our family farmers, it’s still very early in this process and I’m optimistic this group we’ve gathered on this letter can make our case.”
She added that the group will be paying close attention to details of an exemption, including “how family operations are defined as well as who qualifies as a family member.”
Representative Jim Costa, whose district includes California’s fertile San Joaquin Valley, also helped organize the letter, which was signed by Democratic lawmakers representing other rural districts in California, New York, Illinois, Minnesota, Arizona, Oregon, Virginia and Washington state.
Pelosi is already facing a push from more than 20 House Democrats to include an expansion of the state and local tax, or SALT, deduction, a valuable tax break to residents in high-tax parts of the country, like New York and New Jersey. Those lawmakers, far more than the number needed to sink any bill in the House, say they won’t vote for Biden’s economic agenda unless SALT is addressed.
Biden’s $2.25 trillion jobs plan and $1.8 trillion social spending plan face a long road to becoming law. Congressional leaders are currently debating the strategy for how to move the packages forward and discussing whether to include Republicans in some of the effort or to forge a go-it-alone path with Democratic votes only.
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