The Family Farm Relies on Fair Tax Treatment
There are many stresses on our industry: water and workforce shortages, market volatility, supply chain issues, rising costs for fuel, and natural disasters like ongoing drought and wildfires in the West. Meanwhile, the Biden administration and Congress have proposed a host of corporate and inheritance tax increases that would significantly hamper Arizona farmers and ranchers already operating on razor-thin margins.
It is fair to point out that the intent of these tax provisions is to make the “big corporations” and “wealthy” pay their fair share. However, it does not change the fact that these provisions significantly impact our family farms and ranches. Despite many being structured as corporate entities, these are still family businesses and are certainly not the target of their ire. The family farm remains the backbone of agriculture in Arizona where 95 percent of farms are family farms. That’s also true nationally, where small, family-owned operations comprise 9 out of 10 farms.
If we want to protect family farms in this country, it’s vital that we make it possible for these operations to be passed down to the next generation. Increasing capital gains taxes while repealing the beneficial provisions of stepped-up basis would create enormous tax burdens to family-owned farms in Arizona and nationwide. It is important to keep in mind that this would be in addition to the already existing estate tax. The next generation of farmers and ranchers should not have to sell parts of the operation just to pay their tax bill.
It’s also vital that the federal government retain Section-1031 exchanges, a century-old tax provision that gives farmers and ranchers financial flexibility to purchase equipment and merge agricultural land. Farmers and ranchers invest thousands of dollars in irrigation technologies and climate-smart practices, which are made possible due to provisions like Section 1031.
We have been successful so far in pushing back on these provisions. Our Arizona Delegation deserves a lot of credit in helping us keep these provisions from becoming part of the final package so far. However, we must remain diligent and make sure that changes to the tax provisions do not harm our farmers and ranchers.
Now is the time to support Arizona agriculture, which contributes $23.3 billion to our economy and is an integral part of our state’s history. We urge all our members to reach out to Arizona’s congressional delegation to oppose tax increases and the elimination of beneficial provisions that would hurt the agriculture industry and impact the ability of farmers and ranchers to pass their operations down to the next generation.
Editor's Note: This article originally appeared in the January 2022 issue of Arizona Agriculture.