(The Center Square) - Two bills that would change the way inheritances are taxed have been introduced in the U.S. Senate, and they have farmers in New Mexico and nationwide worried.
The Sensible Taxation and Equity Promotion (STEP) Act, introduced by Sen. Chris Van Hollen (D-MD), would allow the government to retroactively tax heirs on all value added to their inheritance over the course of the decedent's lifetime - not just since the decedent's death.
The other bill, called the 99.5 Percent Act and sponsored by Sen. Bernie Sanders (I-VT), would lower the estate tax exemption from $11.7 million per individual and $23.4 million per couple to $3.5 million, or $7 million per couple.
Referring to the STEP Act in an op-ed in the Albuquerque Journal, Chad Smith, CEO of the New Mexico Farm and Livestock Bureau, put it this way:
"An individual who inherited a cattle ranch valued at $1 million from their grandfather, who originally spent $100,000 to buy the ranch in 1989, would have to pay taxes on the $900,000 in accrued capital gains."
As the law stands currently, heirs only have to pay capital gains taxes on inheritances if they sell them, and then only on gains made since the decedent's death.
"Passing a family farm from one generation to the next is extremely important to continue that next generation of farming and ranching so we know the tax burden that could create on our farmers and ranchers could be devastating," Smith told The Center Square.
He points out many farmers and ranchers hold land and equipment for decades and are a vital part of keeping the operation going.
At the request of Sen. John Boozman, R-AR, ranking member of the Senate Agriculture Committee, the Agriculture and Food Policy Center (AFPC) at Texas A&M University studied the effects these bills would have on the country's agricultural producers if implemented, as reported by Farm Week Now.
Looking at 94 representative farms in 30 states, the study found that 92 of the 94 representative farms would be impacted by the STEP Act, with each farm experiencing added tax liabilities averaging $726,104. Under the 99.5 Percent Act, 41 of the 94 representative farms would be impacted, experiencing added tax liabilities averaging $2.17 million per farm, Farm Week Now reported.
"The data speaks for itself and should give pause to anyone considering this approach as an option to pay for new additional federal spending," said Boozman. "If changes of these magnitude[s] are pursued, as some have discussed, the economic harm it will cause will have a lasting impact on rural America."
Smith echoes the senator, saying ramifications could have a major impact on every consumer.
"[The heirs] are not going to be able to afford the tax - they're going to be forced to sell the farm," he said.