I recently completed my third 20 county tour across Iowa’s 1st Congressional District to hear more about issues that are top of mind for Iowans. One topic that came up repeatedly was the Administration’s desire to eliminate stepped-up basis to pay for its continued, out-of-control stream of spending.
As part of his most recent, reckless spending proposal, President Joe Biden asked Congress to eliminate stepped-up basis, and his Administration has since been in overdrive trying to hide the devastating consequences this would have on family-operated farms and small businesses across America.
In a misguided opinion piece, United States Secretary of Agriculture Tom Vilsack claimed that eliminating stepped-up basis wouldn’t hurt family farmers — that couldn’t be further from reality. This Administration is clearly out of touch with the farmers and rural small businesses this proposal would decimate.
The very first question I received at a recent town hall in Tama County was from a young farmer — his grandmother had recently passed away and his family is in the process of transferring their farm to the next generation. He was worried about the Administration’s proposal to eliminate stepped-up basis, which would leave his family with a major tax liability and few options. This young man is not alone in his worry, and despite the Administration’s claim that this proposal won’t tax anyone “who has plowed an acre,” he’s justified in his fear.
Under current law, a generational transfer of property typically follows a “step-up in basis,” ensuring family farmers are not unfairly taxed when land is passed down from one generation to the next. This provision has long ensured farmers have the freedom to do as they choose with their land, whether that be passing it down to the next generation of family farmers or depending on it for retirement, rather than having to plan around an unaffordable tax bill that would require selling the farm.
Farming is a capital-intense industry. Farmers aren’t swimming in cash — their assets are tied up in land, equipment and high-cost inputs. Let me put it this way, so the Washington bureaucrats who wrote this proposal understand: farmers spend their entire lives pouring everything they have into their operations — true “sweat equity” — in the hopes of leaving a legacy for the next generation. Removing stepped-up basis is like the government automatically taking 43 percent of their life’s work. Our farmers work from dawn until dusk to feed and fuel the world, and they deserve better thanks than that.
The Administration has claimed that 95 percent of families won’t face any new taxes under their proposal. Well, let’s do the math. Say you’re a third-generation farmer, and your grandfather bought the family farm in 1950. To exceed the arbitrary tax threshold this Administration thought up, with the current value of an acre in Iowa averaging $7,559, a farm in Iowa would have to be less than 341 acres to avoid President Biden’s crushing taxes. According to the U.S. Department of Agriculture National Agricultural Statistics Service, the average size of a farm in Iowa in 2020 was 360 acres. This means the majority of family farms in Iowa would face this massive tax if stepped-up basis were eliminated.
Secretary Vilsack claims that this would only be a tax on “millionaires and billionaires,” but it’s just the opposite. In reality, eliminating stepped-up basis is essentially sticking a “for sale” sign on thousands of family-owned and operated farms in Iowa, dismissing generations of blood, sweat, and tears, and handing family land over to big corporate investors.
There are countless scenarios and stories from rural America that the Administration is glossing over to further its false narrative on eliminating stepped-up basis. I encourage both the President and Secretary Vilsack to come out to Iowa, walk the farms with us, and hear these stories instead of charging forward with crushing tax hikes on rural America to pay for socialist, wasteful spending.