Farm groups are bracing for President Joe Biden to propose higher taxes on inherited assets and capital gains this week as he proposes at least $1 trillion in new spending for paid family leave, education and domestic concerns.
Also this week, the Supreme Court will debate the authority of the Environmental Protection Agency to exempt refiners from biofuel usage mandates.
Biden is scheduled to speak to a joint session of Congress on Wednesday night and lay out the details of his massive American Families Plan, which is expected to have proposals for child care, free community college and universal prekindergarten as well as family leave.
To pay for the new spending, which will be coupled with expanded tax incentives, he’s expected to propose higher income tax rates for individuals making more than $400,000 a year and an increase in the tax rate on capital gains.
Farm groups led by the American Farm Bureau Federation have been raising concerns for weeks that Biden could propose to do away with the stepped-up basis on inherited assets or even propose to tax all such assets at death.
A group of Senate Democrats led by Sen. Chris Van Hollen, D-Md., proposed last month to tax assets over $1 million that someone inherits. Van Hollen told Agri-Pulse that the $1 million exemption would limit the impact on farms, but tax specialists say the tax bill would still be a substantial hit for farm families, especially given the increase in the capital gains tax rate that Biden is expected to propose.
Farm and business groups, meanwhile, have been releasing studies intended to make the case that eliminating stepped-up basis could seriously hurt family farms and small businesses. The step-up in basis means that heirs who sell an asset they inherit are taxes on the value at the decedent's death, not the value when the decedent acquired it.
A new study that the accounting firm EY conducted for a coalition of business groups says that eliminating stepped-up basis would trim U.S. GDP by about $10 billion a year — 2020 GDP was about $21 trillion — and reduce employment by about 80,000 jobs.
According to a separate study by the American Farm Bureau Federation and the American Soybean Association, farm families could be hit with capital gains taxes worth more than 400% of the average cash rental rate, if they lost the step-up in basis.
Pressed by lawmakers about the issue recently, Agriculture Secretary Tom Vilsack noted that ending stepped-up basis wouldn't be an issue for heirs until they sell their land.
In contrast, a transfer tax such as Van Hollen is pushing could affect anyone who inherits an interest in a farm or business, since it would be applied to the decedent’s last income tax return.
Biden has said little publicly about his plans, but his chief of staff, Ron Klain, on Friday retweeted an Axios statement that said Biden would propose a top marginal income tax rate of 39.6% and a capital-gains rate of 43.4%.
White House press secretary Jen Psaki would say little about the president’s plans on Friday except that “the president's bottom line is that people making under $400,000 a year should not have their taxes go up.”
But Chuck Conner, president and CEO of the National Council of Farmer Cooperatives, cautioned that Biden’s tax and spending plans are a long way from becoming law and that he will likely have to compromise with Republicans on many elements.
“This is still very, very early innings in the debate over taxes and pay-fors in terms of infrastructure and that sort of thing,” he told Agri-Pulse. “I'm not getting too worked up about any of these suggestions out there at this point.”
On Tuesday, lawyers for the refining industry and a coalition of biofuels groups will make their arguments virtually before the Supreme Court over whether EPA has the authority to extend small refinery exemptions that had lapsed.
Refiners are appealing a 10th U.S. Circuit Court of Appeals ruling issued in January 2020, that struck down three SREs.
A three-judge panel said EPA cannot “extend” exemptions to any small refineries whose earlier, temporary exemptions had lapsed. SREs are issued to refiners with production capacity of less than 75,000 barrels per day who claim RFS compliance would cause them undue economic harm.
"Congress intended SREs to act as a critical safety valve to protect vital refining assets while meeting the obligations of the RFS," according to the refiner directly involved in the case, HollyFrontier Cheyenne.
"As it considers the briefing and oral argument, we hope the Supreme Court will rectify the improper statutory interpretation on which the lower court decision was based. Furthermore, we continue to urge EPA to make the RFS program workable. The interests of consumers, workers and the energy security of the United States are at stake," the company said.
But the ethanol industry believes "Congress was very clear that a small refiner only qualifies for an exemption if it has always continuously had one extended," said Geoff Cooper, president and CEO of the Renewable Fuels Association.
Congress intended for the small refinery exemptions to dwindle as time went by until all refiners followed the statute and were held accountable for renewable fuel volume obligations each year, he said. RFA, American Coalition for Ethanol, National Corn Growers Association, and National Farmers Union are respondents in the case.
The court will likely issue an opinion in June.
Also this week, several Cabinet members will be questioned on Capitol Hill about the administration’s spending and policy plans.
On Wednesday, U.S. Trade Representative Katharine Tai will appear before the Senate Commerce-Science-Justice Appropriations Subcommittee and Labor Secretary Marty Walsh will testify before the House Labor-HHS Appropriations Subcommittee.
Here is a list of agriculture- or rural-related events scheduled for this week in Washington and elsewhere (all times EDT):
Monday, April 26
North American Agricultural Journalists annual meeting online through Monday.
4 p.m. — USDA releases weekly Crop Progress report.
10 a.m. — Agriculture Secretary Tom Vilsack speaks to the North American Agricultural Journalists annual meeting online.
Noon — Cato Institute webinar, Biden’s infrastructure plan and alternatives.”
Tuesday, April 27
Supreme Court hears oral arguments in HollyFrontier Cheyenne Refining LLC. vs. Renewable Fuels Association.
10 a.m. — Senate Finance Committee hearing, “Climate Challenges: The Tax Code’s Role in Creating American Jobs, Achieving Energy Independence, and Providing Consumers with Affordable, Clean Energy.”
Wednesday, April 28
10 a.m. — House Labor-HHS Appropriations Subcommittee hearing with Labor Secretary Martin Walsh.
Noon — House Rules Committee hearing, "Ending Hunger in America: Challenges, Opportunities, and Building the Political Will to Succeed.”
2 p.m. — Senate Commerce-Science-Justice Appropriations Subcommittee hearing with U.S. Trade Representative Katharine Tai, 124 Dirksen.
Thursday, April 29
8:30 a.m. — USDA releases Weekly Export Sales report.
10 a.m. — Senate Agriculture Appropriations Subcommittee hearing, “Diversifying On-Farm Income: Opportunities to Strengthen Rural America,” 192 Dirksen.
10 a.m. — Senate Commerce Committee hearing on the nomination of Eric Lander to be director of the White House Office of Science and Technology Policy, 253 Russell.
Friday, April 30
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