While most farmers are preparing for the planting season, the National Corn Growers Association (NCGA) knows there is growing concern over major tax policy changes that may be coming our way. The volatility of income and production costs that growers have seen the last few years makes the tax code even more important for farm profitability.
Trillion-dollar federal budget deficits have consequences. Under the current Congress and administration, it appears tax increases will be considered one of the major ways to reduce budget deficits; NCGA and other ag groups will make the best case possible to promote changes that will help growers keep their hard earned money in their pockets.
“Most farmers have a lot in common with small business owners when it comes to the estate tax,” Bush says. “NCGA believes it should be eliminated for good, but recognize the political reality and the fiscal constraints of the times.”
The House of Representatives took the lead on a tax extenders package in the fall and approved a permanent extension of the estate tax with $3.5 million exemption/spouse at a 45% rate. NCGA expects the Senate to pass a bill to restore the estate tax later this year, and there is significant support in the Senate for a larger exemption amount – as much as $5 million – with a lower tax rate of 35%. Many senators are also right to be concerned about the lack of an index for inflation.
Another very important priority for our grower members is Section 179 Capital Cost Recovery. Since 2003, farmers have been able to write off farm equipment expenses up to $250,000 annually. Without an extension, the investment threshold will fall to $125,000 in 2010 and to $25,000 in 2011. This could prove devastating to both equipment manufacturers and those that supply equipment parts and materials.
NCGA will focus on supporting the business community’s efforts to maintain capital gains rates at 15%. With the high unemployment and tough times in our rural communities, raising the capital gains tax would simply discourage more investment.
NCGA numbers indicate that 40% of farms are reporting some level of capital gains, an increase in the rate could have a very detrimental impact on family farms and the rural economy.