Kentucky Farm Bureau Exclusive: A Candid Conversation with U.S. Senate Republican Leader Mitch McConnellPosted on Sep 26, 2021
KYFB: We have heard many terms over the years when it comes to taxes, especially when dealing with inheritance. What should a farm family currently expect to face, tax wise, when taking over a farming operation after a death?
Leader McConnell: In 2017, the Senate, under my leadership, passed historic tax reform legislation to deliver relief to middle-class families, small businesses, and farmers. That bill was the result of years of work through a robust and open process, including the input and the endorsement of the Farm Bureau. Not only has Republican tax reform benefitted families by making the tax code simpler and fairer, it cut taxes for Americans across all income groups.
For farmers, it did even more. Many of Kentucky’s farms are organized as pass-through entities and I made sure that these types of small businesses received the tax relief they deserve. The bill also improved Section 179 expensing and cash accounting to allow farmers to better plan for the future. As a longtime opponent of the death tax, I ensured our bill doubled the exemption from this unfair tax, raising it to roughly $11 million for individuals and $22 million per couple. Now, far fewer Kentuckians are forced to visit the undertaker and the IRS on the same day.
Tax reform was a tremendous success. It benefited farm families and reinvigorated the entire economy. Unfortunately, Washington Democrats would like to blow the entire thing up. They opposed the bill and its many benefits when it passed, and have made it clear now that they control Congress that they want to roll back many of these important reforms.
KYFB: There have been many attempts to eliminate the “Estate” or “Death” tax. Why is that important at this point in time?
Leader McConnell: Prior to the Covid-19 pandemic, our economy was in the strongest position in modern U.S. history. Kentucky, according to some economists, was experiencing its best economy ever. The 2017 tax reform bill was an integral contributor to that success. Then, a once-in-a-century pandemic disrupted that progress and slammed the brakes on our economy. As we recover, we should focus on the things that helped us achieve so much prosperity in the first place: getting people back to work, encouraging small business growth, and ensuring people get to keep more of their hard earned money rather than sending it to Washington to be spent.
All the proposals from the current administration have signaled that they intend to do the opposite. They have pushed for levels of spending unlike anything I have seen in my time in the Senate and now they are looking for ways to pay for it. One of the most egregious parts of their plan is to eliminate stepped-up basis and increase taxes on all productive sectors of our economy, effectively forcing farm families to bear the responsibility for Washington’s mismanagement. This is the exact opposite of what we should be doing. We need to get our economy back on track and we can’t do that by putting additional burdens on the middle class, small businesses, and farmers.
KYFB: When talking about the “stepped up basis” rule or law, what exactly does that mean?
Leader McConnell: Stepped-up basis is a tax provision that determines how an asset is taxed when its owner passes away and it is inherited by the next generation. The current structure is good for farmers in Kentucky and around the country. Right now, when someone inherits an asset, such as a home or a family farm, the tax basis of that asset is “stepped up” to the current value, rather than the value when it was purchased, eliminating a potentially massive capital gains tax bill – or second death tax – on the inherited asset. This significantly reduces the tax burden on the next generation and helps ensure that family farms can stay in the family.
KYFB: Why is it so important that this regulation stay in place?
Leader McConnell: Small farms make up 50 percent of all farms in Kentucky. They are the bedrock of our farming economy and a vital part of our state’s heritage. Stepped-up basis sounds complicated, but the importance of it isn’t. The straightforward reality is that eliminating that provision, like the Biden administration proposes, would devastate our small family farms. It would all but ensure that fewer and fewer generations will be able to pass down these family legacies because the tax bill will be too high for it to make financial sense.
Last month, every one of my Republican colleagues in the Senate and I sent a letter to the President making sure that he understood that every single one of us are opposed to eliminating stepped-up basis. Our reason is simple. The family-owned businesses, farms, and ranches that would bear the brunt of this change consist of largely illiquid assets that would need to be sold or leveraged to pay their tax burden, forcing them to sell property, lay off their employees, and even close their doors. No grieving family should have to bury a loved one and lose their family farm on the same day.
I will never support eliminating stepped-up basis, under any circumstance.
KYFB: As we look forward, what agricultural priorities will you be focused on for the rest of the 117th Congress?
Leader McConnell: I am the only congressional leader not from New York or California. So, it is my job to look out for Middle America, and as a Senior Member of the Senate Agriculture Committee, that means especially looking out for farm families and rural communities.
Preserving stepped-up basis will be a high priority, but I am also keenly focused on expanding broadband access across Kentucky and fighting back against overregulation. During the Obama Administration, family farmers were crushed under an avalanche of red tape. This onslaught of government overreach was epitomized by the “Waters of the U.S.” rule, which they tried to use to give federal bureaucrats control over every pothole, ditch, and puddle in America. I was proud to prevent that rule from going into effect, but now President Biden would like to return to these types of failed policies. I will make it my priority to stand in his way.
As a senior member of the Senate Agriculture Committee, we are also beginning to work on the next Farm Bill. The legislation will help drive economic development in our farm communities. Throughout the negotiation process I will focus on maintaining a strong commodity safety net that protects crop insurance, supports future generations of farmers, and preserves our land. Farm families deserve stability and I will continue working with the Kentucky Farm Bureau to ensure the Senate will provide it.
KYFB: From an advocacy standpoint, what would you tell Farm Bureau members to do at this point in time?
Leader McConnell: As the Biden Administration’s plan to eliminate stepped-up basis illustrates, liberal leaders in Washington are deeply out of touch with the farming communities that keep our country fed. They are pursuing the largest expansion of the federal government in recent memory and will take aim at any vulnerable community they can find just to pay for it. To combat this threat, Kentucky’s farmers need to make their presence known and their voices heard.
The Farm Bureau is a great place to start. For more than a century, they have advocated on behalf of Kentucky’s farmers and ensured our leaders in Washington listen to their rural constituents. At a time when far-left liberals seem to have forgotten about our rural communities, the Farm Bureau has never been more important. I encourage all Farm Bureau members to double down on their commitment to this great organization and continue to support their advocacy efforts in Frankfort and Washington.