Congress Drops Major Farmers’ Tax Concerns | Local company
GENE LUCHT Farmer in Iowa today
While it’s still unclear what tax changes may or may not be included in Congressional tax legislation this year, it seems most of the scary things for farmers are no longer on the agenda as the country is heading for Halloween.
“What has emerged is that many rural lawmakers listened to their constituents and came to the conclusion that there was a lack of support … for some of the proposed changes to the tax system,” said Kristine Tidgren. , director of the Center for Agricultural Law and Taxation at Iowa State University.
To be clear, last week Congress did not pass any changes to the tax system. Lawmakers in Washington, DC, have been in negotiations over spending and tax bills throughout the summer and fall and so far have not come to an agreement.
But the most dramatic changes that were put on the table last spring appear to be off the table now, says Tidgren, and it shows Democrats and Republicans in rural areas have had an impact on the proposals.
President Joe Biden has campaigned on the idea of investing in infrastructure, recovering from the COVID-19 pandemic and revising the tax code. In early 2021, he and Congressional Democrats passed a COVID-19 relief bill, but his broad proposals to overhaul the tax code and spend large sums of money on infrastructure collided. hurdles early, and some of the tax code ideas sent farmers and landowners into a state of virtual panic.
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One of the most important of these was a proposal that would have effectively eliminated the increased base.
“It was a big concern of the agriculture industry and farmers,” says Krista Swanson, research associate at the University of Illinois.
The worry could even be an understatement. Farmer groups immediately seized on the issue and made their voices heard, bluntly telling lawmakers that they did not want to end the strengthened base. The idea is as follows: currently, when a farm or other property is transmitted on death, the heir is not taxed on the increase in the value of the land since its purchase (or its previous transmission). If a farm was bought for $ 1,000 an acre in 1970 and is now worth $ 10,000 an acre, there was no capital gains tax on that difference.
Since last week, the strengthened groundwork changes have not been included in any of the various legislative proposals under discussion in the House or Senate. Neither chamber looks likely to eliminate the 1031 swap program either, Tidgren says.
A number of ideas are still being proposed or discussed with respect to tax legislation, but the bottom line is that some of them may hurt some farmers and some of them may help some farmers, Tidgren says.
On August 10, the Senate reached a compromise on a $ 1.2 trillion infrastructure package. The bill passed 69 to 30, and most analysts expect it to eventually pass in the House, where Democrats have a majority.
But it has been linked to a reconciliation bill that could include up to $ 3.5 trillion in money for infrastructure, dental and visual benefits for Medicare beneficiaries, climate articles, preschool education. free and free education at community colleges. The size of that package drew opposition in the Senate, where moderate Democrats Joe Manchin, D-West Virginia, and Kyrstin Sinema, D-Arizona, led the way in pushing for a smaller package.
A group of Progressive Democrats in the House have suspended a vote on the Senate package until they get a vote on the larger bill. This led to an impasse and negotiations.
Meanwhile, Congress passed short-term extensions to the country’s debt limit and government funding, both of which had more to do with past spending than this.
Tax changes that could be included in a final bill are still pending, Swanson says. As of last week, some of the proposals under discussion included:
The corporate tax rate could be increased from a maximum rate of 21% (it was 35% before the tax reduction law of 2017) to 26.5%. It is important to note that the current level of 21% is a flat rate. Before 2017, he was graduated, with some people only paying 15%. The new proposal would once again put it on a phased basis, meaning some people could actually see their corporate tax rates drop as much as 18%.
The top personal income tax rate could drop from 37% to the old level of 39.6% and taxpayers would reach that percentage when their income exceeds $ 400,000 for an individual and $ 450,000 for an individual. couple.
Capital gains taxes could increase. Currently, the maximum rate is 20%. It could go up to 25%.
The 3.8% increase in the health care tax could be applied to more and different taxes and thus could increase rates for some taxpayers.
The unified credit, also known as the exemption level to be met before inheritance tax is due, could be changed. The 2017 legislation increased this amount to $ 10 million per person and $ 20 million per couple. This has been indexed and now stands at around $ 11.7 million per person and $ 23.4 million per couple. This exemption could be reduced to $ 5 million or $ 6 million for one person and $ 10 million or $ 12 million per couple.
It should be noted, Swanson says, that in 2020, only 0.16% of U.S. farms owed tax. Even if this law were amended, it would only apply to a very small percentage of agricultural estates.
It’s all written in pencil at the moment. But Swanson and Tidgren both say that the most onerous ideas for farmers that have been put forward are no longer actively discussed.
The discussion is important now, they say, but the tax ideas currently on the table could benefit some farmers or hurt some farmers, depending on the size and structure of their specific farms. It is evident that both sides listened to the voices of farmers during the debate.