Hawkeye Reporter

A new proposed tax by President Joe Biden’s administration may ultimately hurt Iowan family farms and other small businesses.

Biden’s proposed “American Families Plan” would increase taxes on inheritance by eliminating a provision allowing heirs to report the value of assets at the time of inheritance, according to The Center Square.

The existing provision allows heirs to circumvent capital gains taxes if they sell off the assets at the time of inheritance.

Under the new proposal, heirs would pay taxes on the rise in value of their inheritance during the lifetime of the deceased. The tax is directed at very wealthy heirs, according to The Center Square.   

This caveat could be potentially damaging to heirs who inherit family farms with state farmers alleging the tax burden could be significant due to how much farms can increase in value during the lifetime of the previous owner.

Chris Hagenow, president of Iowans for Tax Relief, said the tax proposal was cumbersome.  

“When it comes to passing down a family farm to a niece or a nephew, the tax liability can result in selling the whole farm or significant pieces of the farm off simply to pay the tax bill,” he said, The Center Square reported. “There is no question that an inheritance tax is a significant burden on families' farms and their continuity.”

The Center Square reported that the tax would apply to inheritances worth over $1 million, which would include the value of plots of land necessary to continue the operations of the farm.

House of Representatives Ways and Means Minority Leader Kevin Brady of Texas also criticized the measure, according to The Center Square.

“Democrats have pledged to repeal ‘stepped-up basis,’ which is what makes it possible for a family business — like a farm — to pass from one generation to the next without being forced to sell off assets to pay an enormous tax bill to Washington,” he said.

“Democrats’ proposal to repeal (the) stepped-up basis encapsulates everything wrong with their entire tax agenda,” Rep. Adrian Smith (R-NE) said, according to The Center Square. “They have proposed doubling the capital gains rate to nearly 40% in the name of so-called ‘fairness,’ rather than prioritizing economic growth or even revenue.”

The move is not entirely popular on the Democratic side either, as 13 of the lawmakers don’t approve of the proposed tax, The Center Square reported.

An April study by The Family Business Estate Tax Coalition showed the proposed changes to the inheritance tax would cost over 80,000 jobs annually and catapulting to 100,000 after 10 years, thus reducing the gross domestic product by $10 million each year for 10 years.

The report went on the state that it would reduce wages “given that about 1/3 of the burden of the tax increase is shifted onto labor because the tax-induced reduction in investment makes labor less productive.”