WASHINGTON – U.S. Senator Kevin Cramer (R-ND), along with every member of the Senate Republican Conference, sent a letter to President Joe Biden urging him to abandon his effort to impose a capital gains tax increase on family-owned businesses, farms, and ranches by repealing a part of the tax code commonly referred to as “step-up in basis” or “stepped up basis.” The senators argue such a repeal would have a devastating effect on multi-generation operations, which could lead to job losses, liquidation, or outright closure.
“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 family-owned businesses, farms, and ranches from being hit with a crippling tax bill when a family member passes away,” the senators wrote. “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.
Stakeholders in North Dakota offered their support for this effort.
“The North Dakota Stockmen’s Association joins with the Senate Republican Caucus in urging the president to forego any plans to repeal the stepped-up basis and increase capital gains taxes,” said Jeff Schafer, cattleman and president of the North Dakota Stockmen’s Association. “A recent study by the Family Business Estate Tax Coalition quantified what we have long known: family-owned businesses, like the ranches in North Dakota, and the local economies they support would be hit the hardest by the repeal of the stepped-up basis, and this would hamper farmers’ and ranchers’ ability to transfer their operations to the next generation. The study developed a case study based on a theoretical cow-calf operation, where the stepped-basis was no longer a tool to be utilized when the generational transfer occurred. The result: an immediate one-time tax liability equivalent to 280 percent of the farm’s annual income. In short, this would be devastating to those who put food on the world’s table.”
“Farmers and ranchers face many challenges when passing their way of life down to the next generation,” said Daryl Lies, president of the North Dakota Farm Bureau. “Removing the stepped-up basis provisions, in many cases, would make it impossible to continue many families’ heritage in agriculture.”
“Businesses in North Dakota are working to recover from the economic pressures from COVID-19. Farmers and Ranchers are struggling thanks to drought, the last thing any business trying to stay afloat needs to worry about is getting taxed for simply trying to keep a tradition alive when so much is already stacked against them,” said National Federation of Independent Business North Dakota State Director Alison Ritter.
National leaders also endorsed the Senate Republicans’ letter.
“Passing on the family farm to the next generation is a top priority for many farmers and ranchers,” said Zippy Duvall, President of the American Farm Bureau Federation. “Eliminating stepped-up basis and increasing capital gains taxes will make it much more difficult, or even impossible, for parents to pass on their farm or ranch to their children. This is a critical tool for America’s farmers and ranchers, and we urge all members of Congress to oppose efforts to eliminate it.”
“At a time when small businesses are working to recover from the COVID-19 pandemic, repealing stepped-up basis would be a devastating setback for family-owned businesses,” said Courtney Titus Brooks of the National Federation of Independent Business (NFIB). “The current proposal to eliminate stepped-up basis would cause significant job losses and would leave heavy tax burdens on future generations. Small businesses thank Senators Thune, Daines, and Crapo for advocating on behalf of family-owned businesses and urge Congress to keep this important policy in place.”
“We appreciate the efforts of Senators Thune, Daines, and Crapo to inform President Biden on the catastrophic impacts that the repeal of stepped-up basis would have on all family-owned businesses and are grateful to see so many in Congress are fighting to preserve the common-sense tax provisions so critical for U.S. cattle producers,” said Danielle Beck, senior executive director of government affairs of the National Cattlemen’s Beef Association. “The Biden Administration has made clear that bolstering the American economy is a top priority and recognized agricultural supply chain resiliency as a core component of that effort. Family-owned agricultural operations are the economic drivers of rural communities across the United States; therefore, it is imperative that this Administration understand that resiliency can only be achieved and maintained when new generations – whether their family has had a long history in agriculture, or they are breaking into the industry – can build upon the contributions of today’s farmers and ranchers.”
“Stepped-up basis has helped family-owned businesses and farms stay in the family for generations,” said the Family Business Estate Tax Coalition (FBETC) Steering Committee. “President Biden’s proposal to repeal this longstanding tax provision would saddle future generations with unsustainable tax burdens and make it that much harder to continue operating family-owned businesses and farms across the country. In addition to subjecting family-owned businesses and farms to a significant tax increase, repealing stepped-up basis also would lead to an estimated 800,000 job losses over the next decade. The FBETC appreciates Senators Thune, Daines, and Crapo for standing up for family-owned businesses and farms and we are hopeful that Congress will protect U.S. workers by preserving stepped-up basis.”
“If step-up in basis is eliminated it will be an economic disaster for family businesses, their employees, the local communities, and the national economy,” said Pat Soldano, president and CEO of the Policy and Taxation Group. “Family businesses create 59% of the workforce, 83.3 million jobs, and 54% of the GDP, $7.7 trillion. Elimination of step up and an increase in capital gains could result in an 81% tax on the business owner when he dies.”
The Associated General Contractors of America, National Association of Manufacturers, and the U.S. Chamber of Commerce offered their support as well.
to read the letter.