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How will Biden play land, taxes? (Editorial)

by | Mar 1, 2021

In the flurry of executive orders from President Joe Biden days after his inauguration, one committed to conserving 30 percent of the country’s water and land by 2030.
By all accounts, it’s an ambitious goal, especially on the land side, with only 12 percent of the United States deemed conserved, according to the U.S. Geological Survey.
That leaves 10 years to conserve some 440 million acres, an area more than twice the collective size of Texas.
The order goes from eyebrow raiser to head scratcher when taken alongside Biden’s proposed tax plan that could drastically change how and even if family-owned farmland is passed down to future generations and kept in agriculture.
Biden’s $4 trillion tax plan would raise the long-term capital gains tax to 39.6 percent on income above $1 million and repeal the so-called “step-up basis” that brings an inherited property to a full, fair market value on death.
Without the step-up basis, tax experts say parents would be passing down years of deferred tax liability for their children to pay and also make it more difficult for some heirs to buy out others in order to keep the land in farming.
In too many cases, heirs would have to sell land just to pay the tax of inheriting it.
“The step-up in basis provides tax benefits for everyone passing down appreciated assets, including real estate, stock, family companies and more,” wrote tax attorney Robert W. Wood in Forbes. “For generations, assets held at death have received a stepped-up basis — to market value — when you die. Small businesses count on this.”
Biden has also said the current exemption ceiling for estate tax at $11.5 million per individual and $23 million per married couple is too high.
With speculation of it falling to $3.5 million per individual, it would trigger an estate tax for 12 percent of farmers and 74 percent of farmland, based on national averages for land prices.
Driving the administration’s conservation commitment is its emphasis on addressing the impacts of climate change and saving endangered species.
But should the tax plan become law, the threat to privately-owned land would be directly at odds with meeting the 30-percent goal.
More than half the United States’ forests that are key in sequestering carbon from the atmosphere, and about two-thirds of the animals on the Endangered Species list, exist on private land.
Stir in the estimate from land and conservation groups that between 370 million and 400 million acres of agricultural land will change hands in the next 20 years, and it becomes a recipe for more farmland to be sold to top-dollar paying developers so families can meet their tax bill, putting the country further from the goal.
Conserving farmland means purchasing easements, establishing forest buffers and pollinator habitat, but it also means preserving the ability of farmers and their families to stay profitable and successfully pass down land from one generation to the next.
Letting farmers keep land with a viable path for succession will always be a better plan than taxing it away.

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