fb - voice of agriculture

Newsline

Newsline is updated every Tuesday and Thursday at 5:00 P.M. Eastern!

January 3, 2013

We Didn't Fall Off the Fiscal Cliff

For more information on Newsline, contact: Kari Barbic, Media Specialist, American Farm Bureau Federation, karib@fb.org.

 
There’s good news and bad news when it comes to averting the “fiscal cliff.” American Farm Bureau Economist Matt Erickson explains in this story from AFBF’s Johnna Miller.
Miller:So in the final hours the House of Representatives passed the legislation that stopped the nation from plunging off the fiscal cliff. Good news, right? Well, American Farm Bureau Economist Matt Erickson says, sort of.
Erickson:Congress has to do three things in the spring. One is to address the $1.3 trillion in across the board spending cut over ten years that was set to occur if no action was taken before January 1. Two is the debt limit hike. Congress can only borrow so much and there’s a limit to that. That issue is going to be coming up here late February end of March. Third the continuing resolution that funds most programs for fiscal year 2013 is set to expire March 27th of 2013. So Congress did kick the can down the road with this fiscal cliff package.
Miller:Another example is with the farm bill. Congress passed an extension, but that means the process for writing the new farm bill will have to start all over again.
Erickson:In the perfect world we would like to have a five-year farm bill in place, however the one-year extension does provide a little bit of certainty heading into the spring.
Miller:Another major short-term fix is likely a big relief for consumers…for now.
Erickson:We did avert the fiscal cliff, but we also averted the dairy cliff, as well. So we won’t be seeing the $38 reference prices for dairy and consumers probably won’t be seeing $7 to $8 milk at the grocery store.
Miller:Probably the best news for farmers and ranchers involved estate taxes, even though the top tax rate rose from 35 to 40 percent.
Erickson:They did extend the estate tax exemption to $5 million. If we were to go over the cliff it would be reverted back to 2001 levels of a $1 million exemption at a 55 percent rate. Now it’s going to be $5 million for the exemption at a 40 percent rate. With the average age of a farmer at 58 years old, the biggest issue for farmers and ranchers is how am I going to pass on my farm to the next generation. And so when that time does come, a lot of farmers don’t have cash on-hand to actually pay for the estate tax. How are farmers and ranchers going to pay for it. They have to sell off land. They have to sell off equipment.
Miller:But the higher exemption means fewer worries for a lot of farmers and ranchers out there. Johnna Miller, Washington.
Miller:We have one extra actuality with AFBF Economist Matt Erickson. He says another provision will hit everyone who is on someone else’s payroll. This cut runs 19 seconds, in 3-2-1.
Erickson:One of the hidden tax policies that was set to expire was the payroll tax cut. It did increase from 4.2 percent to 6.2 percent meaning that the check that you take home to your family is going to be taxed a little bit more and on average it’s expected about $1500 to $1600 will be taken out of your paycheck on a yearly basis.
Miller:Newsline is updated Mondays and Thursdays by 5pm Eastern time. Thank you for listening.

Return to Newsline Index