U.S. farmers are nervous about proposed tax changes floating around Capitol Hill. Several proposed tax changes are designed to help pay for President Biden’s Build Back Better legislation. Dustin Sherer, director of congressional relations with the American Farm Bureau, spoke during a Farm Foundation webinar on the proposed tax changes. He says the large spending proposals need to be offset.
“The reason that we’re talking about taxes is because the Senate and the House, after a long negotiation, adopted a budget resolution for three-and-a-half-trillion dollars in spending. Importantly, it authorized all of the non-tax writing committees to spend amongst themselves about $1.75 trillion. What directions it gave to the tax-writing committees is that it said you essentially only need to raise a billion dollars over the next decade,” he explained. “The reason that this is important is that all that the tax-writing committee is required to do is anything that it spends money on within its jurisdiction, it has to raise the revenue to offset by a billion dollars more than it spends.”
He says for “everything they want to spend money on,” officials either have to find an offset or raise tax revenue to pay for it. “They came out with a bill that raised roughly a trillion dollars in the corporate tax. It raised roughly a trillion dollars on the individual side of the tax code. It raised $100 billion in tobacco taxes, and they expected to raise about $100 billion from increased revenue from IRS enforcement. The big offsets in the plan were a repeal of a drug rule, and the imposition of drug price negotiations, where they expected to save $700 billion from those. And then they put in place a dynamic score for this bill, where it said when you put all these policies in place, we expect GDP to grow so much that it will generate an additional $600 billion in tax revenue over the next decade. And that’s where you get to the three-and-a-half-trillion dollar number.”
Those figures come from the legislation written in the House of Representatives. The Senate’s reaction to some of those proposals has not been positive. With pressure to pay for the cost of the bill, some are worried about seeing potential changes to the stepped-up basis coming back on the table.
According to Erick Gullicksrud with Compeer Financial, some farmers are planning ahead just in case the changes go through Congress. “With the nervousness all summer, we’ve just had a lot of clients calling us, and a lot of them are actually moving ahead talking to some of the attorneys we work with. They’re so worried about this gifting maybe being de-coupled, and so if they’re staying with a sizable estate, they’re actually getting some of this land moved.“
