Uncertainty in farming is nothing new, and farmers and ranchers are exceedingly adept at navigating challenges. But even this skill has its limits, and we may be reaching them.
Crop prices remain low for the fourth year in a row. Net farm income is roughly 50 percent what it was over the same four years. Volatility is on the rise in international markets resulting from trade disputes.
A farm bill is on the horizon, and Washington is engulfed in partisan debate over tax reform.
Taking one challenge at a time seems like a wise course of action, and not creating self-inflicted wounds is another. But there seems to be no shortage of self-inflicted wounds coming out of Washington. Why is Congress burning through political capital and valuable time to push through tax reform that is deeply unpopular? A CBS poll finds 70 percent of Americans don’t think these bills should be a top priority, and aQuinnipiac poll finds opposition to the bills by a margin of two to one.
For most family farms, the benefits of this tax package are almost non-existent.
The estate tax could be repealed, or, at least doubled to $11 million for individuals and $22 million for families. Our farm falls well short of that figure. Additionally, certain deductions are increased to levels well outside the bounds of family farms. As an example, section 179, an important expensing tool, would be increased from $500,000 to $5 million. That seems excessive, especially considering the limit was $125,000 only a few short years ago.
On the flip side, some provisions do harm to tax deductions that benefit family farmers. The deduction for domestic production activities is vastly reduced, which could do significant harm to Indiana’s agricultural cooperatives and their farmer patrons.
Likewise, reductions in carryback provisions for net operating losses are problematic, especially as many of us face multi-year losses and need to reach back to profitable years. Limiting carryback from five to two years is damaging. The narrowing of like-kind exchanges is also unwelcome.
One component that impacts both farmers and those outside of agriculture are changes to the treatment of home ownership. Depending on how farmers file, this could really be a kick in the pants. Changes to mortgage interest deductions could be capped at $500,000 and only applicable to a single property. While only 0.4 percent of mortgages in Indiana are higher than $500,000, at $7,000 an acre for average cropland, I’m willing to bet a chunk of those mortgages could be unincorporated farms.
If the objective is to jump-start the economy, Congress is headed the wrong direction. Currently, the Federal Reserve estimates our economic growth to be at 1.8 percent. The Congressional Budget Office pegs growth, when including the effects of tax reform, at 1.8 percent. A more optimistic projection by the Penn-Wharton Budget Model estimates that the House plan could add 0.5 percent to 0.9 percent to GDP by the end of the decade. This begs the question: Why is Congress willing to increase the deficit by $1 trillion or more in exchange for such anemic growth?
The spending spree that is the current tax reform plan will increase the deficit at the same time Washington should be working in a bipartisan fashion to reign it in.
As an American, I’m alarmed Congress is advancing a tax package that analysis shows will not benefit average Americans, and in the same breath, cut programs like Medicaid, Social Security and nutrition programs.
As a farmer, I’m also concerned budget cuts won’t stop with social safety net programs. Is the farm bill, due up for reauthorization in 2018, next on the chopping block?
It is time for Congress to return to policies that favor families over corporations, the middle class over the rich, and that bring our fiscal house in order without slashing necessary government services.