Rural Issues: Stay vigilant about taxes

I have no doubt that most of you reading this are keenly aware of the proposed massive changes to tax policies in this country and the potential impact on small businesses and family farms. Despite the promise from the Biden administration that family farms will be protected, the whole concept leaves many of us uneasy, to say the least.

The Agricultural and Food Policy Center at Texas A&M University recently analyzed legislation introduced in the Senate that would change tax liabilities of transitioning farm and ranch estates. Joe Outlaw, with AFPC, says the study shows that many farmers “would not be able to pay taxes off immediately and would have to set up loans and pay them out over time to stay in business or sell off land.”

AFPC has completed studies for both parties of the Ag Committees for almost 40 years. AFPC maintains a database of 94 representative farms in 30 different states. That data, in conjunction with a farm-level policy simulation model, allows the center to analyze policy changes on farms and ranches across the country.

Under current law, when the owner of a farm or ranch dies, the estate is subjected to federal estate taxes. As of 2021, $11.7 million per individual and $23.4 million per couple in assets are exempted from the estate tax, protecting most farms from the estate tax. When farm assets are passed to an heir, the heir can take fair market values as their basis in the property, avoiding capital gains taxes.

The study found that eliminating stepped-up basis in the STEP Act, even with the $1 million exclusion, would impact 92 of 94 representative farms. That includes all the ranches and dairies, with an additional tax liability incurred of $726,104 per farm.

Imposing lower estate tax exemption levels from the 99.5 Percent Act would impact 41 of the 92 representative farms with an average additional tax liability incurred of nearly $2.2 million per farm.

The Constitution puts Congress in charge of the budget, which it works with the president to complete. The Constitution also grants Congress the power to collect taxes, borrow money and approve spending.

Most of us, as citizens of these United States of America, understand the importance and accept the responsibility of paying taxes. However, many of us feel we are being unfairly taxed to pay for government’s spending blunders.

I have seen many people throw up their hands and say there is nothing more they can do. I disagree. You can stay informed and get legal advice as to adjustments that should be made to your family estate.

And you should pay close attention to how those who represent you in Congress vote. Listen to them, yes, but what they might say does not always match their actions when it comes time to vote.

Stay vigilant.