Regardless Of How They Vote, Dems Are Proposing To Hammer Family Farms And Small Businesses With A Double Death Tax

Though Democrats Claim They Want To Protect Family Farms, The Truth Is That They Have Proposed A ‘Double Death Tax’ That Would Hit ‘America’s Hardworking Farmers And Other Generationally Owned Businesses’ Hard


SENATE REPUBLICAN LEADER MITCH McCONNELL (R-KY): “President Biden campaigned on a pledge not to raise income taxes on the vast majority of Americans. But the latest reckless taxing and spending spree that Democrats are cooking up would crush our country with a historic set of sweeping tax hikes. Here’s one of the targets in their crosshairs: Family farms. It appears our colleagues’ plan will eliminate tax rules that allow family property to be passed down without facing a new devastating tax burden. Without the fix in question – the so-called stepped-up basis for capital gains taxes – scores of family businesses across America could feel a massive squeeze. In states like Kentucky, family farms drive the rural economy. But as I’ve heard from many of my state’s family farmers, it’s operations like theirs that are especially at risk. … Family farming in the Commonwealth isn’t just a way of life. It’s considered a birthright. But if Democrats foist the bill for their reckless taxing and spending spree on rural America, a lot of this heritage could be ripped out of families’ hands and put on the auction block.” (Sen. McConnell, Remarks, 7/21/2021)

  • LEADER McCONNELL: “In states like Kentucky, family farms drive the rural economy. But as I’ve heard from many of my state’s family farmers, it’s operations like theirs that are especially at risk. One Kentucky farmer said his family has worked the same land in Muhlenberg County for nearly 150 years. He had hoped to one day pass his property along to his children, just like it was passed to him. But after generations spent improving and investing in the same farm, he’s worried it could all be gone in the blink of an eye. Another Kentuckian described how her family, like many farmers, is ‘asset rich [but] cash poor.’ If the stepped-up basis is eliminated, her family could lose the home, barns, machinery, and fields that have been their life’s work.” (Sen. McConnell, Remarks, 7/21/2021)

SENATE REPUBLICAN WHIP JOHN THUNE (R-SD): “[I]t is stunning that President Biden is proposing new tax increases on family-owned businesses and agricultural producers to pay for his $3.5 trillion reckless tax-and-spending spree. The U.S. tax code allows family-run businesses to be passed down to the next generation without imposing capital gains taxes on the built-in gains from the prior generation. After all, many of these ‘gains’ are unrealized – the price of the land may have risen since being owned by previous generations, but farmers aren’t seeing a penny of actual gain. It’s called ‘step-up in basis,’ and it prevents families from paying a fortune when a loved one dies. But the Biden administration is targeting this longstanding part of the tax code as it scrambles to pay for its far-left crusade to permanently grow the federal government and fund the massive tax breaks they’re proposing for wealthy Americans in blue states.” (Sen. Thune, Op-Ed, “Biden, Dems’ Reckless Tax-And-Spending Spree Would Decimate Family Farms And Businesses,” Fox News, 8/08/2021)

  • SEN. THUNE: “The Texas A&M Agricultural and Food Policy Center studied how this new tax would affect family operations, and it found that 98 percent of the representative farms in its 30-state database would pay a big price. How much? On average, the proposal would increase the tax liability by $726,104 per farm. … This could devastate states like mine where agriculture is the number-one industry and our lifeblood. In South Dakota, nearly every single farm is family-owned and family-operated. Farmers dream of passing their operation to their loved ones in a better condition than when they received it, and in fact, more than 2,500 farms in South Dakota have been under the care of the same families for 100 years or more.” (Sen. Thune, Op-Ed, “Biden, Dems’ Reckless Tax-And-Spending Spree Would Decimate Family Farms And Businesses,” Fox News, 8/08/2021)


It’s ‘A Backdoor Death Tax’ That Even Some Democrats Warn Could ‘Create An Unintended Outcome Of Losing Family Farms’

THE WALL STREET JOURNAL EDITORIAL BOARD: “[T]he Biden Administration has proposed a $1 million cap on the ‘step-up in basis,’ which excludes unrealized gains from taxation at death. This is a backdoor death tax, and Penn Wharton estimates the change would raise up to $113 billion over a decade.” (Editorial, “The Capital-Gains Revenue Illusion,” The Wall Street Journal, 5/06/2021)

“Democrats want to fund a big chunk of their spending package by curbing the nearly century-old provision, sometimes called the Angel of Death loophole and technically known by the clunky term ‘stepped up basis at death.’ Along with a related plan to raise capital gains rates on millionaires, it is projected to raise more than $300 billion over 10 years.” (“Democrats Struggle With Plan To Tax Dynastic Wealth,” Politico, 06/08/2021)

  • “The Biden proposal would blow up several longstanding tax concepts: That capital gains deserve a lower tax rate than wages and that people can inherit old assets without paying capital-gains taxes.” (The Wall Street Journal, 4/29/2021)
  • “Opponents of Mr. Biden’s plan warn of steep combined rates on people hit by both taxes. ‘If we lose the step-up in basis, that turns the estate planning world upside down,’ said Alvina Lo, a tax attorney and chief wealth strategist at M & T Bank Corp. unit Wilmington Trust.” (The Wall Street Journal, 4/29/2021)

“Rural Democrats issued a warning Thursday about the Biden administration’s plan to tax unrealized capital gains at death, saying they are worried about the potential impact on family farms…. ‘I’m all in support of the Jeff Bezoses of the world paying their darn fair share because they can afford it and we need it,’ Rep. Cindy Axne (D., Iowa), the letter’s lead author, said Thursday. ‘But we can’t create an unintended outcome of losing family farms.’ Other signers include Rep. Jim Costa (D., Calif.), Abigail Spanberger (D., Va.) and Kurt Schrader (D., Ore.)…. ‘I’m laying down the marker, and I’ve got 13 colleagues who say we agree,’ Ms. Axne said. ‘And many of us come from really difficult seats.’” (“Farm-District Democrats Raise Caution Flag on Capital-Gains Tax Plan,” The Wall Street Journal, 5/06/2021)


Family Farmers, Small Business Owners, And Even Those Who’ve Simply Owned Their Homes For A Long Time, Are Deeply Concerned About Getting Hit With This Tax Hike

“Farmers worry about having to pay tax on land that’s been appreciating for decades while small business owners are concerned about being able to hand down their companies to children.” (“Democrats Struggle With Plan To Tax Dynastic Wealth,” Politico, 6/08/2021)

“Manufacturers and farmers, who tend to be more asset-rich and cash-poor, are watching closely for those details, concerned they might have to sell illiquid businesses to pay the taxes. Courtney Silver, president of Ketchie Inc., a family-owned, 25-employee machine shop in Concord, N.C. that started in 1947, said she was concerned about the potential impact. ‘I really can’t imagine being hit with that decision of that potential tax implication,’ said Ms. Silver, 40 years old, who took over the business when her husband, Bobby Ketchie, died in 2014. ‘That to me is really hard to wrap my head around.’” (The Wall Street Journal, 4/29/2021)

“J.R. Peterson farms soybeans and corn on 700 acres in northern Iowa that has been in his wife’s family for three generations and is concerned about the potential changes. Even if there is a carve-out for farms that stay within a family, he worries that his children would be faced with a tax bill in the millions if they chose to sell the family’s land after inheriting it. ‘We don’t consider ourselves wealthy, we scrape and claw for everything,’ Mr. Peterson said. ‘If something like this would go through, there are a lot of people responsible for putting safe and healthy food on people’s tables that are going to be massively impacted.’” (“Farm-District Democrats Raise Caution Flag on Capital-Gains Tax Plan,” The Wall Street Journal, 5/06/2021)

“Vera Dunn lives in Beverly Hills, Calif., with her 102-year-old mother in a house bought for about $100,000 in 1965. Ms. Dunn estimates the house would be worth $10 million to a buyer who would tear it down. She said she has borrowed $4 million against the house to pay for her mother’s care and is already concerned about California tax changes on inherited property. If her mother lives past the effective date of the Biden plan, Ms. Dunn said, it would be impossible to pay the taxes and keep the house. ‘It happens to be a beautiful house in a beautiful location. It happens to be all I have,’ she said.” (The Wall Street Journal, 4/29/2021)


The Farm Bureau Says Removing The Stepped-Up Basis Would ‘Penalize’ Farmers And ‘Risks The Livelihood Of America’s Family Farms’

AMERICAN FARM BUREAU FEDERATION: “To minimize the impact of burdensome capital gains taxes, farmers and ranchers use stepped-up basis, which provides a reset for the asset value basis during intergenerational transfers. … To protect these family farms and minimize the impact of capital gains taxes, it’s important that farms have continued access to stepped-up basis. Eliminating stepped-up basis to generate more federal income risks the livelihood of America’s family farms and the economic sustainability of these family operations long into the future.” (“Elimination of Stepped-up Basis Poses Hazards to Family Farms,” American Farm Bureau Federation, 4/07/2021)

MARK HANEY, Kentucky Farm Bureau President: “Removing stepped-up basis would require the heir of the property to pay tax gains based on the original purchase price of the farmland rather than the market value on the date of inheritance. Farm Bureau opposes this, and we must continue our efforts, at all levels, to ensure sound legislation is passed that would help farm families, not penalize them for wanting to continue a tradition which we all depend upon.” (“KFB President Mark Haney: Passing The Farm To The Next Generation,” Kentucky Farm Bureau, 5/05/2021)


Meanwhile, Democrats Are Also Trying To Include A Break For Wealthy Residents Of High-Tax States That Even The Far-Left New York Times Editorial Board Says ‘Would Allow The Wealthiest Americans To Pay Lower Taxes’

“One of the biggest potential sticking points for a partisan infrastructure and social-spending push is actually a tax cut: Several Democratic lawmakers want to ease the $10,000 deduction cap for state and local tax payments. Removing or raising the cap has support from Democrats in high-tax coastal areas like California, New York, and New Jersey, including Rep. Katie Porter (Calif.), a high-profile ally of Sen. Elizabeth Warren (Mass.) and a fledgling progressive icon.” (“Biden’s Tax Plan to Fund Spending Boom Stirs Democrats’ Unease,” Bloomberg Tax, 6/04/2021)

THE NEW YORK TIMES EDITORIAL BOARD: “Why Are Democrats Pushing a Tax Cut for the Wealthy? … Democrats [campaigned] in the 2020 elections … on the need for the wealthiest Americans to pay higher taxes. Now the party is flirting with a major change in tax policy that would allow the wealthiest Americans to pay lower taxes. A bloc of House Democrats, mostly from the New York area, are loudly withholding support for a broad package of tax increases to fund President Biden’s infrastructure plan unless it also includes a tax cut: an unlimited deduction for state and local tax payments, or SALT…. In an open letter [in April] addressed to the House speaker, Nancy Pelosi, 17 of the 19 Democrats who represent New York threatened to do exactly that, writing that they ‘reserve the right’ to vote against any tax increase that does not include a ‘full repeal’ of the $10,000 limit on the SALT deduction, enacted in 2017. A number of Democrats from other states, including New Jersey and California, have taken a similar stand…. Proponents of an unlimited SALT deduction say they are seeking to help middle-class taxpayers. If so, they should go back to the drawing board. The top 20 percent of American households, ranked by income, would receive 96 percent of the benefits of the change, according to a detailed analysis by the widely respected Urban-Brookings Tax Policy Center. The primary beneficiaries would be an even smaller group of the very wealthiest Americans. The 1 percent of households with the highest incomes would receive 54 percent of the benefit, on average paying about $36,000 less per year in federal income taxes.” (Editorial, “Why Are Democrats Pushing a Tax Cut for the Wealthy?,” The New York Times, 4/25/2021)

SEN. BERNIE SANDERS (I-VT), Senate Budget Committee Chairman: “It sends a terrible, terrible message when you have Republicans telling us that [SALT deduction] is a tax break for the rich… In fairness to Schumer and Pelosi, it is hard when you have tiny margins, but you have got to make it clear which side you are on — and you can’t be on the side of the wealthy and powerful if you’re going to really fight for working families.” (“Bernie Sanders Opposes Push To Reinstate SALT Deduction,” Axios, 5/09/2021)



Related Issues: Middle Class, Taxes, Senate Democrats