Farmers and ranchers share tax considerations with Brady

Posted by Jennifer Whitlock
Field editor

Farmers and ranchers from Texas's 8th Congressional District recently shared their concerns with Congressman Kevin Brady over the Biden administration's proposed tax increases.

At a forum discussion in Porter hosted by the Texas Farm Bureau (TFB), Brady openly discussed President Joe Biden's proposal to raise some taxes and repeal portions of the 2017 Tax Cuts and Jobs Act.

"We know from the Family Business Estate Tax Coalition that repealing this one provision that will cost (increase property tax) over a million US jobs in its first 12 years and a whopping 100,000 jobs every year," he said. “And that doesn't stop. Paychecks are falling and the US economy is shrinking because of that. It is unfair. It's wrong, and it punishes the wrong people for working all their lives. "

Farmers like Charles Ring, who grows cotton, sorghum, and corn, shared how retrospective changes to capital gains taxes in 2021 and the abolition of the increase in the property tax base could wreak havoc on their businesses.

Currently, Ring said, he has older cotton pickers that he wants to trade in and buy new machines. However, when he asked his auditor whether he ought to pay capital gains tax on the "income" from the trade-ins, the accountant was unsure.

"The money I get from the old pickers is 'normal income' under the current rules, but we have a reinforced base and (section) 179 to counter that," he said. "But if we lose some of that, I could get a lot of revenue that doesn't even have to do with production."

Eliminating the increased tax base and taxing unrealized capital gains upon death would affect not only current farmers and ranchers, but future generations as well, TFB District 11 state director Allen Kaminski told Brady.

"We have had operations in our family for over 125 years and I am 58 years old," he said. “My two daughters, my six grandchildren… where I live, outside of Houston, I'm not sure they can afford to keep the operation going if we come around when these tax changes come into play. I want this country to stay in my family. "

The death taxes don't just affect the rich, Brady replied. He said farmers, ranchers and small business owners will bear the brunt of the tax increases with the abolition of the elevated base.

But he urged those in attendance to continue to share their stories and concerns with lawmakers on both sides of the aisle. It may be difficult to get proponents of tax hikes and the removal of certain regulations to change their minds, but it is possible if their constituents speak up.

“I think (the legislators pushing for change) expect these changes because they aren't talking about you. You're talking about the rich, so don't feel sorry, ”Brady said. “But as soon as you start talking about family farms, everything changes. If we do our job right, we will stop doing it. "

Changes to capital gains tax policy that remove or reduce the increased base could result in massive tax burdens for farmers and ranchers, noted Laramie Adams, TFB National Legislative Director. Under current tax law, death transfers are not treated as a "sale" and capital gains are not taxed. Those who inherit arable land can also increase the tax base of the property to the market value without paying capital gains tax. Instead, the property is “upgraded” to its current value, so that capital gains taxes are only paid if the property increases in value, as the property was inherited.

The value of many farms is in the land and in the equipment, Adams explained. Eliminating this raised base would make it harder for family farms and ranches to pass since capital gains taxes would likely exceed the farm's net income.

“As our members discussed with Congressman Brady, raising the base is a tax tool that farmers and ranchers routinely use to pass farms and land from one generation to the next. If the elevated base were taken away from them, taxes would likely well exceed the country's annual income, meaning they would likely have to liquidate to pay the taxes and lose their family land and livelihood, ”Adams said. “It's not fair to the families who are working to keep this business going for the next generation, and that's not how it is done in this country. We don't reward hard work by effectively removing inheritance rights from their children. "

He reiterated Brady's warning that lifting the elevated base would also hurt the US economy.

In a recent report for the Family Business Estate Tax Coalition, study leaders found that middle-class family businesses would be hardest hit by the repeal, noted Adams. Gross domestic product relative to the U.S. economy in 2021 would decline by about $ 10 billion over 10 years, with farmers, ranchers, and other small businesses bearing the weight of the economic downturn.

"The American Farm Bureau Federation and the Texas Farm Bureau are working diligently with our lawmakers to make sure everyone understands how damaging these changes could be to family farms and ranches," said Adams. “We encourage our members to share their concerns with us and their lawmakers because this is a very real, very urgent problem and the family heritage is at stake. The difference between whether you can give your farm or ranch to your children or grandchildren is pending, so we definitely need all of our members to get involved and act. "

TFB plans further discussions in tax forums across the state. If you are interested in attending, please contact Adams at 254.751.2654 or email [email protected].

“Since January we have made almost 45 farm tours with our congress delegation. This tax problem is one of the top topics we hear about, "said Adams. “We have the stories, we just have to make sure they are shared. If you can put it in your own words, raw video, anything you can send us, share the Farm Bureau and other farming organizations and help reinforce that message … well it seems simple but real people that Sharing their real concerns is very powerful. ”

You can also find more information on the subject here.