As they look to divest their land and buildings, they set the selling price to recover the cost of capital gains taxes. This increases the price of farm assets needed by beginning farmers and ranchers and discourages individuals from entering agriculture. Farmers and ranchers face similar problems when selling common stock. A capital gains tax applies to both inflation gains and legitimate gains above the rate of inflation. Capital represents the modern tools that all Americans work with on the job.
Capital formation makes the average American worker more productive.
Improvements in worker productivity lead to higher real wages and improvements in worker conditions. In 1997, the maximum capital gains tax for individuals was reduced from 28 percent to 20 percent. The maximum tax rate will be lowered to 18 percent for assets held for 5 years beginning in 2006. The President vetoed the bill. AFBF policy states that Congress should repeal capital gains taxes.