Hamill: Be clear on the right steps to save family farms

Communications by text or email often cause the reader to misunderstand the writer’s intent. So too, newspaper columns.

When messages or thoughts are delivered in person, the ability to read the speaker’s face and to detect the inflection in the voice reduces the risk of miscommunication.

So today I want you to imagine me with a bemused look as I make my points. This message is to reduce the risk that I will be seen as ranting.

As one more form of insulation, let me say that my family has a history of farming. My paternal grandparents raised 10 children on a farm in Michigan.

My maternal grandmother was raised on a dairy farm in the Netherlands. My brother-in-law was raised on a family farm in Arizona.

I have nothing against family farms or farmers. As is so often true, my problem is with congresspeople.

As discussions ramped up on 2025 tax legislation, 22 members of the House introduced a resolution to maintain “stepped-up basis.”

Let me first explain what this is. Section 1014 of the tax code provides that the tax basis of inherited property is its fair market value, typically at the date of death.

This is not “stepped-up” basis, but rather an adjustment to basis. We assume that the value of an asset exceeds its tax basis, so we call it stepped-up basis.

For example, assume that mom has Apple stock that she purchased for $100,000. At her death, the stock is valued at $500,000.

If mom passes the stock to daughter upon mom’s death, daughter’s tax basis is adjusted to $500,000.

Daughter can then sell the stock after mom’s death and pay no tax. This example does step up the basis by $400,000.

Let’s say mom instead bought stock in a popular electric car company for $100,000 a few months ago. At her passing, that stock was worth $60,000.

If daughter inherits this stock, her basis is adjusted from mom’s $100,000 to the $60,000 value at death. This is a step down in basis.

OK, tax lesson over and back to the House resolution about “farms.” The resolution is designed to advocate for retaining this inherited property basis adjustment.

How do you make a case for this? Easy. Make it all about farms. No, even better, family farms. This bemuses me.

Rep. Mark Alford, R-Mo., said, “The stepped-up basis ensures that hardworking American families can pass down their legacy without being burdened by crushing tax liabilities.”

Alford continued, “I am proud to support this resolution to protect farmers, ranchers and small business owners.”

Rep. Tracey Mann, R-Kan., said, “More than 98% of all American farms and 90% of American businesses are family-owned and operated.”

Mann elaborated, that “farmers, ranchers and agricultural producers are the backbone of America.”

Alford also called family farms the backbone of his district’s economy. Without stepped-up basis, they would face “crushing tax liabilities.”

Mann similarly said no stepped-up basis was a “farm-killer tax” that would “crush them with devastating capital gains taxes.”

Rep. Bob Latta, R-Ohio, said stepped-up basis “allows the generational transfer of their (farm) operations.”

Wow! One tax provision can crush the backbone of many communities if eliminated. Farms will be killed.

Well, that’s not good. If code section 1014 is needed to preserve family farms we should all support its retention.

But this is the same argument used to get rid of the estate tax. The estate tax is imposed on the value of large estates.

The estate tax might force a sale of a large family farm or ranch. That would take the property out of the family’s hands.

But the basis provision only affects people when they sell the inherited asset. If the farm is to be kept in the family, it has no impact at all.

No basis step-up does not even induce someone to sell. In fact, it would make it less likely that they would sell.

Eliminating basis step-up seems to be a protector of keeping the family farm in the family. Not selling avoids the “killer tax” and the “crushing tax liabilities.”

There are reasons to retain the basis adjustment rule. Preserving farms within the family is not one of them.