Transfer Tax Provision of American Families Plan Causes Alarm

Brian German Agri-Business, Industry

Several concerns are being raised in relation to President Joe Biden’s American Families Plan, particularly something being referred to as a “transfer tax.” Former Chairman of the House Agriculture Committee and President and Founder of The Peterson Group, Collin Peterson recently wrote an opinion piece detailing the issue. Peterson points out that the plan does not eliminate the stepped-up basis for inherited assets. However, there is a provision in the plan that would enact a transfer tax when an asset changes hands.

Transfer Tax

“I would argue this transfer tax, which could be as high as 43.4 percent, is the worst idea that has been proposed in terms of its impact on agriculture in my lifetime,” Peterson wrote in an editorial. “This proposal is a direct assault on agriculture because it will prohibit the transfer of a family farm from one generation to the next which is the last thing we should want to do.” 

Ranking Member of the Senate Agriculture, Nutrition and Forestry Committee, John Boozman has also voiced concern about the potential of a transfer tax. In an editorial for the Washington Examiner, Boozman highlights the importance of Section 1031 of the tax code. Family farms have relied on Section 1031 for many years. It allows for the deferment of capital gains taxes when property is exchanged. Boozman notes that changes to Section 1031 would severely hamper agricultural business and create further barriers of entry for new and beginning farmers.

“The president has proposed limiting access to Section 1031 to no more than $500,000, after which point, capital gains taxes would apply. This proposal effectively imposes a ‘land swap tax.’ In many cases, it would require very few acres to trigger this tax,” Boozman wrote. “There are a number of unintended and negative consequences associated with imposing a land swap tax on family farmers.”

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Brian German

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Ag News Director, AgNet West