Industry leaders say farmers require long-term certainty
By SEAN ELLIS
Agricultural groups are supporting legislation they believe would put farmers and ranchers in a better position to pass their operations on to the next generation by providing greater tax certainty.
Bills introduced last month in the U.S. House and Senate would stop the current tax rate for capital gains from increasing when it sunsets at the end of 2012.
The current long-term capital gains tax rate of 15 percent is set to jump to 20 percent on Jan. 1, 2013. Bills by Sen. Mike Crapo, R-Idaho, and Rep. Peter Roskam, R-Ill., would permanently cap the rate at 15 percent.
Crapo said allowing the tax rate to sunset, coupled with a looming 3.8 percent tax related to the healthcare reform act, would mean a 58 percent higher rate on capital gains.
Capital gains taxes are paid on assets, such as property, that are sold at a profit. According to American Farm Bureau Federation, 40 percent of all farmers and ranchers report some capital gains, twice the rate for all taxpayers, and are disproportionately affected by it.
AFBF President Bob Stallman said keeping capital gains tax rates at their current level is especially important for farmers and ranchers because low rates increase the incentive for farmers and ranchers to invest in assets to grow their businesses and help them remain profitable.
He said higher rates make it difficult for many family farms to buy the land, buildings and animals they need to remain efficient, and they also threaten the ability of farmers to transfer their land to the next generation.
"The impact of capital gains taxes on farming and ranching is significant because production agriculture requires large investments in land and buildings that are held for long periods of time," Stallman stated in a news release.
Stallman said that because capital gains taxes are imposed when assets such as buildings and farmland are sold, "it is more difficult for producers to shed unneeded assets to generate revenue to adapt and upgrade their operations."
National Potato Council President Justin Dagen said that because America's family farmers operate on a long-term capital-intensive timeline, they require long-term tax certainty.
Dagen, a Minnesota potato farmer, said NPC and the growers it represents support the legislation because it would "provide farmers greater tax certainty and help keep family farms within families."
"With the estate tax already putting at risk the transferring of farms within families, growers like me need to be confident that our tax rates on the sale of land and other capital assets won't increase and impose additional burdens on our operations," he said.