Washington finally focuses on tax reform
After years of talk, Washington is starting to get serious about tax reform. Both the president and leaders in Congress say they want to develop a tax reform plan this fall.
For farmers and ranchers, there are potential gains and losses from tax reform.
We would like to gain lower capital gains taxes, elimination of estate taxes and expansion of immediate expensing so more farmers and ranchers can invest in their operations. We hope not to lose tax deductions and provisions, such as cash accounting, like-kind exchanges and the business interest deduction, which help farmers and ranchers lower their tax burden.
Profit margins in farming and ranching are tight. Tax reform plans that fail to factor in the impact of lost deductions for all business entities and for all rate brackets could result in a tax increase for agriculture. That is not the “reform” we need!
Sorting out how to reform our tax code and pay for the changes isn’t easy. I don’t envy the members of the tax writing committees, but I do have suggestions for them.
Farm Bureau believes tax reform should embrace the following principles:
Comprehensive: Tax reform should help all farm and ranch businesses, including sole proprietors, partnerships and sub-S and C corporations.
Effective tax rate: Tax reform should reduce combined income and self-employment tax rates enough to account for any deductions or credits lost.
Cost recovery: Tax reform should allow businesses to deduct expenses when incurred, continue cash accounting and Section 1031 “like-kind exchanges,” and keep the deduction for state and local taxes.
Estate taxes: Tax reform should repeal estate taxes and continue stepped-up basis, which sets the value of land and buildings at what the property is worth when inherited.
Capital gains taxes: Tax reform should lower taxes on capital investments. Capital gains taxes should not be levied on transfers at death.
If the tax committees allow these principles to guide their work, they will succeed in creating a tax code that is simpler, more transparent, revenue neutral and fair to farmers and ranchers.