Boozman: USDA report disproves administration’s stepped-up basis claims
The Agriculture Department on Thursday released a report on the impact of proposed changes to the stepped-up basis system of land valuation on family farms that Sen. John Boozman, R-Ark., said “disproves the Biden administration’s claim that only 2% of family farms would be affected by its proposed changes.”
USDA released a report from the Economic Research Service on the Biden administration’s proposed changes to estate tax law.
In a summary, the report said, “The results suggest that of the estimated 32,174 family farm estates in 2021, 1.1% would owe capital gains taxes at death, 18.2% would not owe capital gains taxes at death but could have deferred tax liability if the farm assets do not remain family owned and operated, and 80.7% would have no change to their capital gains tax liability.”
In an news release, Boozman said, “For months, Republicans have been calling on the Biden administration to provide substance to back up its claims. Those who really understand farming, ranching and rural America tell us that the talking points officials are using simply do not add up.”
“This report, which the department understandably released with little fanfare, proves their math was beyond fuzzy — it was outright wrong. By its own account, USDA now shows changes in stepped-up basis will saddle many family farms with millions of dollars in taxable gains that could be subject to capital gains tax rates as high as 43.4%.
“According to USDA, family farmers and ranchers who would have an additional tax liability with the elimination of stepped-up basis, through either immediate or deferred taxes, are responsible for 65% of our nation’s agricultural production. Put simply, USDA’s own economists have shown that the administration’s plans pose a threat to rural America.”
As a background statement, Boozman said, “Following the release of the American Families Plan (AFP), USDA issued a statement indicating that 98% of farm estates will not owe any tax at transfer, provided the farm stays in the family. At that point in time, USDA did not release any information supporting their claim that only 2% of family farms would be affected by proposed tax changes.
“After the Biden administration failed to back up this talking point, Republican members of the Senate Agriculture Committee called on USDA to make public a detailed explanation and any supporting economic analyses that clarify how the Biden administration’s proposed tax increases will affect farm estates.
“USDA finally provided its data in a report entitled The Effect on Family Farms of Changing Capital Gains Taxation at Death. The report used mortality estimates from the Social Security Administration to simulate the probability of a person’s death to generate an estimate of the number of farm estates that would be created as a result. Then using farm-level survey data, USDA estimated the impact of AFP tax proposals on family farmers and ranchers.
“The additional taxable gain on farm assets across all affected estates averaged $1.8 million per farm family. The percentage of affected farmers is nearly 10 times higher than the administration’s claim that only 2% of family farms would be affected.
“According to USDA’s analysis, 17% of small farms, 66% of mid-sized farms, 80% of large farms, and 96% of very large farm operations would have a new tax burden with the elimination of stepped-up basis.
“When one takes into consideration the value of farm production, family farmers and ranchers producing 65% of U.S. agriculture commodities would have an additional tax liability with the elimination of stepped-up basis.”
The American Farm Bureau Federation’s Market Intel service also published its analysis of the ERS study and others.
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