CARBONDALE — As President Joe Biden’s tax plan makes its way through Congress, some Illinois farmers are concerned that with its passage, the legacy they have built for the next generation might come to an end. The Biden tax plan has been floated in bills that started to arise about a month ago. Analyses of
CARBONDALE — As President Joe Biden’s tax plan makes its way through Congress, some Illinois farmers are concerned that with its passage, the legacy they have built for the next generation might come to an end.
The Biden tax plan has been floated in bills that started to arise about a month ago. Analyses of Biden’s proposals could end the step-up-in-basis for estates that eliminates the capital gains tax bills on assets when they are passed to an heir.
Adam Nielsen, director of national legislation and policy development for the Illinois Farm Bureau, said the plan to end the step-up-in-basis is a way to fund an ambitious infrastructure bill. What maybe stings more is that the ILFB has backed infrastructure plans. But Nielsen said they’ve done so not at constituents’ expense.
“We’ve got to find a way to pay for it that doesn’t change the tax code dramatically like the way this does,” he said.
Nielsen explained what the new scenario would mean. He said if farmland was purchased decades ago for a few hundred per acre but is now worth thousands per acre, the estate would owe the difference per acre at the end of the owner’s life.
“If we lose the stepped up basis, that’s going to be devastating,” Franklin County farmer Leon McClearen said of the potential change. He said taking this away would simply be unfair.
Ken Taake farms in Pulaski County with his brothers, and they are the fourth generation to work the land there. He agreed with McClerren.
“If you have heirs that want to keep the farm going, it would really put them in a bind,” Taake said. “There’s not enough liquidity to pay an estate bill like that.”
McClerren and Taake said farmers look wealthy on paper, but much of that wealth is tied up in assets like land and equipment. Their take-home pay is often quite less.
“A lot of times the people involved live close to the poverty level even,” he said, lumping himself into that statement.
“Back in the ’80s, there were days when I did not know how we would buy groceries for the kids that week,” McClerren said. He recalled his wife asking when they could have newer things and drive nicer cars like some of their neighbors.
“Honey, we will someday,” he would say. He said they are in a much better place today but these gains could be short lived if his heirs have to sell the farm when he dies simply to cover capital gains.
McClerren said so much sweat equity is put in on top of the real capital that is constantly reinvested into the farm and all of this is done with the hopes of passing it down to someone — McClerren said his children don’t want the family business but he is training another young person to fill his shoes when he dies.
While the outlook isn’t rosy for farmers, Nielsen said the pie is not baked just yet.
“They put it down on paper and people are reacting to it and I think we still have an opportunity to influence this before it’s all said and done,” Nielsen said. He said lobbyists have gotten the attention of lawmakers and he hopes to see different language in the final bill. But he said there’s still uncertainty.
“There’s a lot of anxiety in farm country,” Neilsen said.
Looking at the future of his farm, Taake said he hopes his work won’t be for nothing.
“You would like to think that time and effort you’ve put in to build up a business … what we’ve managed to accumulate over the years would stay in existence and stay in the family,” Taake said. “It really is disturbing to think that that might not happen.”
Taake said the proposed changes to the tax code could reframe an old adage: “The only rich farmer is a dead farmer.”
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