Raising the Capital Gains Tax Penalizes Farm Growth

By Matthew Nicaud
September 30, 2021

Many on the Left claim to be supporters and advocates of blue-collar working families, such as farmers and ranchers. “Tax the Rich” they say. But an example of how untrue these claims are can be found in a proposed change to the capital gains tax that would hurt many family farms.

Biden has proposed an increase on the capital gains tax. The political optics of this proposal have sought to portray the tax increase as something almost exclusively towards the easy political targets, such as luxurious business tycoons and stock market billionaires. Noticeably absent from these portrayals of the policy are the farming families that would also be affected by the proposals.

As technology and automation grow, farms are growing in size as production costs go down and farmers can manage more land. For example, in 1920, the average Mississippi farm was 67 acres. Fast forward to the present day, and the average farm is 300 acres. This is a 350 percent increase in average farm size. Also, according to the 1920 Mississippi agricultural census, the state had around 272,000 farms and 29 percent of the Mississippi workforce were directly employed by agriculture.1 Today, the state has 34,700 farms and about 8 percent of the workforce is directly employed2 by agriculture. Despite this 87 percent decrease in the total number of farms, the number of cultivated acres has decreased by only 42 percent.

Less farms means that there are fewer farmers today, and the average farmer will own more land. This means that while the farmers of former days generally had less land and assets, today’s individual farmers will often have hundreds of acres that they can farm with relative ease because of modern technology.

This means many modern farmer’s estates have more value -value that the government can potentially tax upon their death through tax policy changes. Under current law, no capital gains taxes are imposed on the value of farms being sold by heirs. If a farmer buys land for $400,000 and the farm is worth $800,000 at the time of death, the heirs of the farm would not have to pay any capital gains tax if they chose to sell the farm.

But the Biden tax hike would change that. The proposal imposes capital gains tax on the sale of any estate valued at more than $2 million for all land and equipment.3 Such a measure fails to recognize the growing size of family farms. Such a change penalizes the increase in farm size that mechanization and innovation has enabled. 

While Washington is putting trillions of dollars of debt on future generations, it adds insult to injury for those same leaders to tax the heirs of hardworking farmers. Farmers have the tools and technologies to produce more than ever before. An increase in the capital gains tax goes directly against these accomplishments and skims off of the fruits of American farmers’ productivity and increased success.   

[1] This only counted actual farmers and does not include indirect agricultural employment.

[2] See footnote 1

[3] $1 million for single individuals  


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