By Ben Nelson
There are more than 2 million farms in the United States — including more than 150,000 in Nebraska, Iowa, and South Dakota — and 97% of them are family-owned operations. It has become more challenging than ever for them to stay in business, and now there is a proposal in Washington to make things even worse, by imposing a new tax on “unrealized gains.” It would require farm owners to pay taxes on the increased value of their operation every single year.
It just doesn’t make any sense to tax income that hasn’t yet been earned, especially when it comes to agriculture. Farmers and ranchers often accrue substantial assets, primarily in the form of land and equipment, which can significantly appreciate in value over time. Historically, they haven’t been penalized for that — it’s what makes these farms so valuable to preserve from generation to generation. Taxing the unrealized gains of these operations would impose a severe burden on these families, potentially jeopardizing the future of their farms already strained by local property taxes.
In practice, new taxes on unrealized gains could actually force family farms to sell off parts of their land or liquidate assets simply to pay this new tax. Instead of fostering growth, it would remove capital from both family farms and small businesses. From there, it’s a domino effect: it becomes harder to reinvest in their business, upgrade equipment, or pass their operations for the next generation.
Moreover, taxing unrealized gains would exacerbate the financial uncertainties that farmers already face, making it even more challenging for them to navigate market conditions. Family farms deserve certainty and simplicity in the tax code — especially amid such a changing and unpredictable landscape. An unproven tax scheme like this is not the answer.
The policymakers pushing for this tax on unrealized gain say it’s a “wealth tax,” and that it’s about “fairness.” But we know how this works — no matter where the threshold may start, this is a potential slippery slope that could end up affecting everyone. If this really is about fairness, we ought to enforce our current tax laws before creating new and complicated ones. As we speak, nearly $700 billion in federal tax revenue goes uncollected each year. We should start there.
Otherwise, what farmers are facing with this new tax is having to put a value on all of their assets — their land and equipment — each and every year, and likely paying a penalty if it differs from the IRS’s estimates. Can we really trust that the IRS has the ability to implement a new, complex tax like this?
Next month, the U.S. Supreme Court will take up a major case that deals with this exact issue — whether the government can tax income that hasn’t yet been earned. Meanwhile, this proposal is under consideration both in Congress and several state legislatures. As a lifelong champion of agriculture and longtime member of the Senate Agriculture Committee, I urge policymakers in both parties — especially those who represent rural America — to take a strong stand against taxes on unrealized gains. Let’s protect these beacons of free enterprise who help ensure the food security of our nation.
