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Ernst Blasts Biden’s New Tax Hike on Family Farmers, Businesses

U.S. Senator Joni Ernst (R-Iowa), a member of the Senate Agriculture Committee, is blasting President Biden for his plan to hit family-owned businesses, farmers, and ranchers with “a new backdoor death tax.”

 In a letter to the president, Ernst warns that Biden’s plan would make drastic changes to the taxation of capital income amounting to “a significant tax increase that would hit family-owned businesses, farms, and ranches hard, particularly in rural communities” when a family business is passed down to the next generation.

 Ernst writes that, under the Biden plan, if the “step-up” in basis on capital income were eliminated, it would force many businesses “to pay tax on appreciated gains, including simple inflation, from all prior generations of family owners—despite not receiving a penny of actual gain.”

 Ernst continues, “We respectfully urge you to reconsider your proposal to repeal this important part of the tax code. Preserving step-up in basis would save American jobs and ensure that small businesses, farms, and ranches across the country can stay in their families for generations to come.”

 

The Honorable Joseph Biden
President of the United States
1600 Pennsylvania Avenue NW
Washington, D.C. 20510
Dear President Biden,
We appreciate your efforts to address America’s infrastructure challenges, but the cost of these
investments should not be borne by family-owned businesses, farms, and ranches across the
country. We are concerned that your American Families Plan proposes to make drastic changes
to the taxation of capital income, including a longstanding tax provision that prevents familyowned businesses, farms, and ranches from being hit with a crippling tax bill when a family
member passes away.
Under current law, passing down a family business to the next generation does not impose a
capital gains tax burden on the business or its new owners. Rather, the decedent’s tax basis in the
business is “stepped-up” to fair market value, preventing a large capital gains tax bill on the
growth in the business’s value. If the functional benefit of the step-up in basis were eliminated
and transfers subject to the estate tax also become subject to income tax, as you have proposed,
many businesses would be forced to pay tax on appreciated gains, including simple inflation,
from prior generations of family owners—despite not receiving a penny of actual gain. These
taxes would be added to any existing estate tax liability, creating a new backdoor death tax on
Americans.
These changes are a significant tax increase that would hit family-owned businesses, farms, and
ranches hard, particularly in rural communities. These businesses consist largely of illiquid assets
that will in many cases need to be sold or leveraged in order to pay the new tax burden. Making
these changes could force business operators to sell property, lay off employees, or close their
doors just to cover these new tax obligations. The complexity and administrative difficulty of
tracking basis over multiple generations and of valuing assets that are not up for sale will lead to
colossal implementation problems and could also lead to huge tax bills that do not accurately
reflect any gains that might have accumulated over time. As you will recall, a proposal to reach a
similar outcome by requiring an heir to “carry-over” the decedent’s tax basis was tried before in
1976—and failed so spectacularly it never came into effect. It was postponed in 1978 and
repealed in 1980.
Further, the proposed “protections” simply delay the tax liability—rather than provide any real
tax relief—for those continuing to operate the business, farm, or ranch. In fact, these protections
create new “lock-in” effects that could make any eventual changeover in operation or transfer of
the business financially untenable. Imposing a tax increase on hardworking Americans would
harm the economic recovery from COVID-19 and endanger American jobs. A recent study by
E&Y found that eliminating the benefit of a step-up in basis would cost the U.S. economy
80,000 jobs each year over the next decade—and an additional 100,000 jobs per year in the long
run. Additionally, for every $100 in revenue raised by this tax increase, $32 would come directly
from the pockets of American workers. A study by the Texas A&M Agricultural and Food
Policy Center reached equally unsettling conclusions, determining that 98 percent of the
representative farms in its 30-state database would be impacted by a proposal to eliminate the
benefit of the step-up in basis, with average additional tax liabilities totaling $726,104 per farm.
We respectfully urge you to reconsider your proposal to repeal this important part of the tax
code. Preserving step-up in basis would save American jobs and ensure that small businesses,
farms, and ranches across the country can stay in their families for generations to come.
Sincerely,
______________________
John Thune (R-SD)
United States Senator
______________________
Mitch McConnell (R-KY)
Senate Republican Leader
______________________
John Boozman (R-AR)
United States Senator
______________________
Steve Daines (R-MT)
United States Senator
______________________
Mike Crapo (R-ID)
United States Senator
______________________
Chuck Grassley (R-IA)
United States Senator
______________________
John Cornyn (R-TX)
United States Senator
______________________
Rob Portman (R-OH)
United States Senator
______________________
Tim Scott (R-SC)
United States Senator
______________________
James Lankford (R-OK)
United States Senator
______________________
Ben Sasse (R-NE)
United States Senator
______________________
John Hoeven (R-ND)
United States Senator
______________________
Richard Burr (R-NC)
United States Senator
______________________
Pat Toomey (R-PA)
United States Senator
______________________
Bill Cassidy, M.D. (R-LA)
United States Senator
______________________
Todd Young (R-IN)
United States Senator
______________________
John Barrasso (R-WY)
United States Senator
______________________
Joni Ernst (R-IA)
United States Senator
______________________
Cindy Hyde-Smith (R-MS)
United States Senator
______________________
Tommy Tuberville (R-AL)
United States Senator
______________________
Mike Braun (R-IN)
United States Senator
______________________
Roy Blunt (R-MO)
United States Senator
______________________
Tom Cotton (R-AR)
United States Senator
______________________
Ted Cruz (R-TX)
United States Senator
______________________
Roger Marshall, M.D. (R-KS)
United States Senator
______________________
Deb Fischer (R-NE)
United States Senator
______________________
Marsha Blackburn (R-TN)
United States Senator
_ _____________________
Susan Collins (R-ME)
United States Senator
______________________
Kevin Cramer (R-ND)
United States Senator
______________________
Lindsey O. Graham (R-SC)
United States Senator
______________________
Bill Hagerty (R-TN)
United States Senator
______________________
James Inhofe (R-OK)
United States Senator
______________________
John Kennedy (R-LA)
United States Senator
______________________
Cynthia Lummis (R-WY)
United States Senator
______________________
Jerry Moran (R-KS)
United States Senator
______________________
Rand Paul (R-KY)
United States Senator
______________________
Josh Hawley (R-MO)
United States Senator
______________________
Ron Johnson (R-WI)
United States Senator
______________________
Mike Lee (R-UT)
United States Senator
______________________
Shelley Moore Capito (R-WV)
United States Senator
______________________
Lisa Murkowski (R-AK)
United States Senator
______________________
James Risch (R-ID)
United States Senator
______________________
Mitt Romney (R-UT)
United States Senator
______________________
Marco Rubio (R-FL)
United States Senator
______________________
Richard Shelby (R-AL)
United States Senator
______________________
Thom Tillis (R-NC)
United States Senator
______________________
M. Michael Rounds (R-SD)
United States Senator
______________________
Rick Scott (R-FL)
United States Senator
______________________
Dan Sullivan (R-AK)
United States Senator
______________________
Roger F. Wicker (R-MS)
United States Senator

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