Tax Cuts Targeted for Farm and Ranch Families
American Farm Bureau
President, American Farm Bureau
When talk of tax cuts becomes action, there must be measurable benefit for America's farm and ranch families. Four years of Depression-era prices for our commodities do not equip us to pay 21st Century costs.
Tax reform was to have been a major contributor to farm families' incomes six years ago, when existing federal farm policies were adopted. Under President Bush and the 107th Congress, it looks like meaningful tax cuts will finally occur. Your American Farm Bureau is working to assure that cuts will be specifically targeted to help producers keep the assets we have worked so hard to acquire.
Over the past few years, distinctive taxation problems have arisen that put extraordinary pressures on our balance sheets. For instance, income received for renting farmland has begun to be subject to self-employment taxes, in addition to regular income tax. This extra tax is an oppressive burden to many multi-family operations and new tax legislation can put an end to it. Similarly, farmland owners need assurances in writing that payments for land we have placed into the Conservation Reserve Program are not subject to self-employment taxes. Imposing such taxes threatens a program that has made great progress in reducing erosion and improving our natural resources.
Recently, farmers and ranchers regained their ability to average their incomes over a period of years, to stabilize somewhat the amount of income tax we pay. Now, though, if producers do have a good income year, a growing number of agricultural operations are hit with the Alternative Minimum Tax. You will recall that this AMT was implemented to make sure high income earners could not shelter income to avoid all taxation. The tax was designed to make the rich pay their fair share, not to squeeze farm families.
Another reform that would help farm and ranch families is the creation of special agricultural savings accounts for farmers and ranchers to deposit a portion of their pre-tax income for a period of time. Tax would be paid when the account is tapped, most likely in years of lower income. Such a plan would be a distinct aid to our risk management plans and help us manage the bumps and dips of our unpredictable business.
There are other reforms that collectively would subtract little from federal tax revenues but provide a big boost to the ag sector. For instance, we could use a tax deduction when we donate food to hunger relief organizations. And tax preferences to farmer-owned and -controlled cooperatives would also help, such as recognizing and rewarding the economic contributions of cooperative producers of ethanol and other value-added processing and marketing efforts. Reducing cooperative expenses should translate into greater returns to participants.
Of course, the part of President Bush's broad tax cut plan that we especially appreciate is the elimination of estate taxes. Killing the "death tax" has been a major Farm Bureau priority and we almost accomplished it last year. President Clinton vetoed legislation that passed Congress and an override failed by just 12 votes. We again have the opportunity to end this unfair tax, with a new president and a new congress.
But death tax elimination faces the same old arguments by those who say it only helps the rich. Can we expect groups that benefit from the death tax, such as financial planners, attorneys or the insurance industry to support the elimination of this unfair tax? Can we count of state governors who will see the disappearance of state tax payments based on federal estate tax collections join us? Charities are already questioning the total elimination of the death tax, believing they benefit because people contribute rather than lose their assets to taxes.
Farm Bureau members will again play a pivotal role in convincing our members of Congress to provide necessary tax reforms specific to agriculture. As the public debate unfolds, farm and ranch families will urge their elected officials to make these changes now, so relief will be possible now and when the economic cycle turns and we again enjoy productive and profitable years. Tax reform in and of itself will not keep financially troubled families on their land, but the improvements will help a large number of farm and ranch families. And, in the meantime, farmers and ranchers, through Farm Bureau, will seek farm policy reforms that offer financial assistance and assurance immediately.