The House Ways and Means Committee chairman is warning his colleagues that there will be dire consequences for farmers if Congress allows the Trump tax cuts to expire.
Rep. Jason Smith said lawmakers must move before the end of next year to extend the federal estate-tax exemptions, which would help ensure more family farms and small businesses are passed on to the next generation.
The Missouri Republican said the assets of more than two million family farms would be subject to a 40% tax rate, forcing some to choose between eating the tax increase or selling off the family farm or business to come up with the money to pay the tax.
“Farming is inherently fraught with uncertainty which is why it makes zero sense for Congress to compound that challenge by leaving America’s family farmers and ranchers in limbo about whether they are due for a massive tax increase,” Mr. Smith said.
“Just like other small businesses, farmers have to plan for the future and prepare for how they will operate and whether they can afford to pass along their business to the next generation,” he said.
“With the threat of the increased Death Tax around the corner, farmers will have to start calling on lawyers and accountants to help them prepare for how to navigate an uncertain future and decide if they can afford to keep some or all of their family business,” he said.
President-elect Donald Trump will lean on the GOP-controlled Congress next year to extend the 2017 Tax Cuts and Jobs Act, which overhauled individual and corporate tax laws and proved to be the signature legislative achievement of his first term in office.
Democrats have targeted the federal top corporate tax rate cut, saying the law went too far when it slashed that rate from 35% to 21%.
However, the cuts have proven popular, and most of the provisions set to expire at the end of 2025 will impact individuals and families – including the estate tax deduction.
Under the Trump tax cuts, the estate and gift tax exemption was doubled and indexed for inflation.
According to the Congressional Budget Office, the exemption jumped from $5.49 million for an individual taxpayer in 2018 to $13 million in 2024.
If the tax cuts are allowed to sunset, the exemption will return to previous levels, subjecting it to the 40% tax.
Mr. Smith said the increased tax burden would hurt the nation’s 2 million farms — 96% of which are family-owned and 88% of which are small family farms.
Mr. Smith said taxpayers writ large would see an average 22% tax increase if the tax cuts expire. For an average family of four making $80,610 a year, he said that amounts to a $1,695 tax increase.
