The fight for tax breaks is done below the surface in the reconciliation bill | News, Sports, Jobs


By DANIEL C. VOCK

IOWA CAPITAL SENDING

WASHINGTON – Farm groups and farm state lawmakers won a significant victory when House Democrats in the United States opted to leave a significant tax break for inherited property untouched, so far avoiding a confrontation.

But opponents remain cautious that the idea could come back at any time as Democrats shape their massive $ 3.5 trillion budget reconciliation agenda and seek ways to help fund the country’s largest expansion. social safety net since the New Deal.

Farm lobbies and Republicans, as well as influential rural Democrats like Georgia Representative David Scott, have strongly opposed the tax changes proposed by President Joe Biden in his “Build back better” plan for farmland and other assets passed down from generation to generation.

Biden, along with Agriculture Secretary Tom Vilsack, wanted to end the “Reinforced base” to determine taxes on capital gains on these assets. Vilsack, the former governor of Iowa, looked at the pages of the Wall Street Journal and intervened at a White House press briefing to argue that it is necessary to fill loopholes like these to make sure the rich pay their fair share.

Over the next decade, the administration’s plan to tax farmland estates could bring in up to $ 322 billion in new federal tax revenues. But U.S. Representative Randy Feenstra, a Republican from Iowa, said farmers in his district have been complaining about the proposal since it was unveiled earlier this year. Farmers, he said, fear that a new tax regime will make it impossible to keep farms in the family.

“Let’s say a mom and dad bought their farm for $ 2,000 an acre, and now it’s worth $ 12,000 an acre. If they want to give it to their son or daughter or whoever it is, [the heir] would have to pay tax on the difference of that ”, Feenstra told States Newsroom in an interview.

“A son or a daughter would not have this money, so they would have to sell the land to pay the tax” He continued. The buyer would most likely be a large company, not a local farmer, he said. “That’s why so many people fear it will destroy the family farm, literally destroy the family farm. “

Proponents of change say these concerns are exaggerated or easily addressed by political adjustments. But emotional appeals to save America’s small towns seem to have won this round.

Democrats on the House Ways and Means Committee, the group that handled the tax aspects of Biden’s economic stimulus package, left out the changes proposed by the president to the reinforced base when they approved their part of the reconciliation bill last week. The idea could reappear later, as the package continues its journey through the House and Senate. But the committee’s decision reflects how politically radioactive the idea has become.

Several rural Democrats have also backed down from Biden’s proposal. Scott, the chairman of the House Agriculture Committee, wrote to the chairman in June, arguing that the strengthened base was “An essential tool allowing family farms to endure from generation to generation. “

“I worked tirelessly to ensure the protection of the reinforced base. “ Scott said in a statement last week, “and I am very happy that the published package has no impact on the operation of the service.”

But Vilsack, who owns 600 acres of farmland, argues the increased base is really just a way for the wealthy to avoid paying taxes.

“This policy allowed the rich to amass large fortunes”, Vilsack wrote earlier this month in the Wall Street Journal.

“Millionaires and billionaires borrow against their assets, usually stocks or real estate, but also art and collectibles, really anything a bank will lend against. When these assets are transferred on death, their heirs can sell the property without being taxed to pay off the debt. It is one of the most popular ways for the wealthy to avoid tax, and it must stop. “

The agriculture secretary said Biden’s proposal included special protections for family farms.

First, the administration wanted to impose capital gains tax only when the heir sold the property. So, in Feenstra’s example, the son or daughter would not have to pay tax when he inherited the farm, only when he sold it.

Second, Vilsack said the Biden plan would exempt all capital gains up to $ 2.5 million. He said 95% of family farms should do nothing with this level of exemption.

Marc Goldwein, senior vice president and senior policy director of the Committee for a Responsible Federal Budget, said that House Democrats have so far not included changes to the reinforced base was a “Discouraging starting point”.

Getting rid of politics, he said, should be a ” no fuss “.

“You want a tax policy that treats people in similar situations the same, that doesn’t create the wrong incentives and that gradually increases income,” he said. “The reinforced base fails all three. “

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