Tuesday, May 28, 2024

Montana’s farmers and ranchers would bear the brunt of a federal asset tax

by John Lewis
| May 14, 2023 12:00 AM

In his budget plan for the upcoming fiscal year, President Joe Biden proposed a federal tax on assets. This proposal shares the same fundamental flaws of previous wealth tax proposals, especially in the threats posed to farms, ranches and other small businesses. While Biden claims this will be a tax on only a small group of billionaires, regular Montanans will surely feel the effect.

The reason this federal asset tax would be so detrimental to Montana’s businesses, especially its agricultural industry, is because it would place a 25% tax on unrealized gains. This means that successful small business owners could be hit with massive tax liabilities based on the value of their operations. IRS agents would descend on our state to dig into Montanans’ assets, issue valuations and figure out just how much money they can drain from our local communities.

Ranching and farming operations would bear the brunt of this new tax considering the amount of land and equipment that they require. This would be disastrous for many people in a state like Montana where agriculture is the cornerstone of the state’s economy, with over 60% of its land used for agricultural production.

Because a federal tax on unrealized gains would force Montanans to pay the IRS in cash based only on hypothetical values, many would have to sell off their assets simply to afford the tax. Montanans would have to let go of farms and ranches that their families have held for generations.

With the state’s economy so intertwined with farming and ranching operations, a tax on unrealized gains would have a massive impact on the rest of our economy. All the jobs and economic activity stimulated by these industries would feel the impact as families are forced to sell off assets and devote more and more resources to covering their tax burden. Livelihoods would be irreparably damaged by the president’s proposed federal asset tax.

Foreign entities, however, would certainly be thrilled. Already, foreign ownership of Montana farmland totals over 900,000 acres. Hostile governments like China’s would love to have a greater stake in America’s food supply. Sen. Jon Tester understands this threat and has already introduced legislation this Congress to protect our farmland from these malicious foreign purchases. The proposed federal asset tax, however, would work against this effort by forcing Montanans to put more land up for sale and leave it open to foreign grabs.

Taxing unrealized gains discourages ambitious Americans from seeking a better life, starting new businesses and stimulating the economy from the bottom up.

As a Democrat, I agree with others in my party, like Sen. Joe Manchin, who believe that a fair tax system should focus on actual earnings. Americans should be encouraged to succeed and grow. Instead, a federal asset tax would make it harder for average Americans to invest in their homes, their businesses and to ultimately build their wealth.

Lawmakers must recognize the dangers of the so-called "billionaires’ tax" and reject it as they’ve done with past proposals. Montana’s lawmakers from both sides of the aisle must call out the obvious flaws in taxing unrealized gains and take the lead in rejecting this proposal before it’s too late. Montana’s citizens are at risk, and they need effective representation now more than ever.

John Lewis was a candidate for Montana's U.S. House seat in 2014. He lives in Helena.