The transfer tax provision of the American Families Plan raises concern

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Several concerns are being raised about President Joe Biden’s plan for American families, particularly what is being called a “transfer tax.” Former chairman of the House Agriculture Committee and chairman and founder of the Peterson Group, Collin Peterson recently wrote an opinion piece detailing the issue. Peterson points out that the plan does not eliminate the enhanced base for legacy assets. However, there is a provision in the plan that would enact a transfer tax when an asset changes hands.

“I would say that this transfer tax, which could reach 43.4%, is the worst idea that has been proposed in terms of impact on agriculture in my lifetime,” Peterson wrote in an op-ed. “This proposal is a direct attack on agriculture because it will ban the transfer of a family farm from one generation to the next, which is the last thing we should want to do.”

Ranking member of the Senate Agriculture, Nutrition and Forestry Committee, John Boozman has also expressed concerns about the potential for a transfer tax. In an op-ed for the Washington Examiner, Boozman points to the importance of Section 1031 of the tax code. Family farms have relied on Section 1031 for many years. It allows the deferral of capital gains tax when exchanging property. Boozman notes that the changes to Section 1031 would severely impede farming operations and create new barriers to entry for new and beginning farmers.

“The President has proposed limiting access to Section 1031 to a maximum of $500,000, after which capital gains taxes would apply. This proposal effectively imposes a “land exchange tax”. In many cases, it would take very few acres to trigger this tax,” Boozman wrote. “There are a number of unintended and negative consequences associated with imposing a land exchange tax on family farmers.”

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