Tucked away in President Biden and the Democrats’ multi-trillion dollar tax-and-spend proposal are tax hikes that will have an adverse impact on our agriculture community. For the past few months, I have been drawing attention to these tax hikes — including proposals to cap stepped-up basis and like-kind exchanges. As a former chair of the Iowa Senate Ways and Means Committee, I have seen the incredible economic potential that comes with cutting taxes. Unfortunately, Biden’s changes to stepped-up basis and like-kind exchanges would take us in the opposite direction. His plan would raise taxes on Iowa farmers and main street business owners, harming our rural economy at a time when we need to remain focused on recovery and revitalization.
Changing or repealing stepped-up basis is the equivalent of taking the death tax and slapping on a new coat of paint. If stepped-up basis provisions are changed or altogether eliminated, individuals would have to pay hefty capital gains taxes if, for example, a farmer passes away and wants to hand over their operation to a family member. This is one of the top concerns I hear about from folks as I travel the 4th District. At a recent Farm Bureau town hall I attended in Palo Alto County, I met a 6th generation farmer who is concerned he will not be able to take over the family farm due to Biden’s plan to change stepped-up basis.
In June, I challenged Office of Management and Budget (OMB) Acting Director Shalanda Young on the administration’s proposal to tax farm heirs. Less than two weeks later, a report published by Texas A&M’s Agriculture and Food Policy Center stated that eliminating stepped-up basis would impact up to 98 percent of farm transitions. Additionally, an analysis by the American Farm Bureau Federation and the American Soybean Association found tax payments from eliminating stepped-up basis would be significantly higher than cash rents; in fact, they found that tax obligations as a percent of cash rent could reach 476% in Iowa.
To make matters worse, Biden has also proposed limiting 1031 like-kind exchanges. Similar to stepped-up basis, like-kind exchanges are important for farmers looking to retire and pass their property on to the next generation, for rural communities that benefit from incentives for economic investment and revitalization projects, and for small business owners who are looking to improve and expand their companies. Last week, I led 87 of my colleagues in sending a letter to the president urging him to back off his plan to cap like-kind exchanges. Doing so would slap another unnecessary burden on rural Iowans.
President Biden and his administration are failing to recognize the negative effects their hidden tax hikes will have on the men and women who feed and fuel the world. Moving forward, they should work towards solutions that help family farmers transition operations and bolster investments in our rural communities — not create huge tax liabilities for our family farms and main street businesses.
Iowa producers, who are the breadbasket to the world, should not be the ones footing the bill for the Democrats’ reckless spending agenda.
