It is a fitting time to talk about the Tax Code as it applies to farming, ranching or other agricultural pursuits. The Trump Administration says it will have changed the current system by year?s end.
However, Like Obamacare, there are parts of the current tax code that people like. Interest Deductions on money borrowed for farm loans, depreciation, and others.
There is criticism of the current laws.
There is also the likelihood that there will be a new Tax imposed called a Value Added Tax. Even though we pay a lot of tax now, much of it is unseen as payroll deductions, etc. The new tax would increase the price of anything purchased by ten to twenty percent.
Making purchases to avoid taxes could be risking farmers for failure in the future.
During a House Agriculture Committee hearing on tax reforms, Ranking Democrat Collin Peterson of Minnesota cited a need for change. He says current tax policies are leading producers to make similar choices as those made before the 1980?s farm crisis.
“When people would come into my office in December and they would ask me to figure out what their net income was, and then they would ask me how much equipment they had to buy so they wouldn’t have to pay any tax. This is sometimes equipment they needed it, but a lot of times it really wasn’t. This is part of the reason people got in trouble during the farm crisis,” Peterson explained. “My old partners tell me that have the same situation going on now. As we get into this downturn in prices and pressure on agriculture producers, I think you’re going to see more people being in a bind than they would have been because of what they did in the tax area.”
One idea floated in the opening statements of the hearing was reconsidering the fair tax proposal, something previously supported by Peterson and Committee Chairman Mike Conaway.
“Maybe we need to reenact or re-bring up the fair tax, which eliminates the income tax altogether and changes the incentive from buying things to getting rid of tax, to saving to get rid of tax. That changes the whole mentality. I was a sponsor of that for many years, but it kind of died by the wayside,? Conaway said.
He says Congress needs to be careful in what reforms are made.
“I think some of the ideas I heard were getting rid of interest deductions as opposed to letting 100% expensing of all equipment and buildings. I got some real questions about that in terms of what it’s going to do for agriculture. I think we need to be really careful and mindful of how this is going to impact agriculture and our producers.?
Farm groups are calling on Congress to repeal the estate tax in any tax reforms but keep the stepped up basis valuation.
