Tax reform could mean less money for ag

posted Jan. 2, 2018 9:20 a.m. (CDT)
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by / Heidi Clausen, Regional Editor |

By many accounts, the newly passed tax bill came as a welcome early Christmas gift for U.S. farmers at a time when, with the dim outlook for commodity prices including milk and corn, they could use some holiday cheer.

The tax reform package will lower taxes for most farmers, according to American Farm Bureau President Zippy Duvall. Starting this year, they also will be able to take a 20 percent deduction off their business income. The bill also provides some relief by doubling the estate tax exemption to $11 million per person.

“Most of the provisions in this tax bill are temporary, lasting for only seven years, so Farm Bureau will now focus our work on making those important tax deductions, lower rates and the estate tax exemption permanent,” he said.

President Donald Trump didn’t waste any time signing off on the tax package, saying “it makes the vast majority of family farms and small businesses exempt from the estate tax. The estate tax was killing the farmers. They were forced to sell farms at bargain-basement prices. They don’t have to do that anymore.”

However, as is often the case when it comes to actions taken by the federal government, not everybody’s happy — and it’s just not that simple.

Agriculture is due for a new farm bill in 2018, but the passage of the tax bill clouds the future for that legislation as it could mean less available funding for farm programs. All indications are that committee work will get underway this month as planned, but beyond that point in the process, things get a bit murky.

The National Farmers Union came out as “staunchly opposed” to the tax bill because of its “regressive taxation structure, devastating implications on health care affordability and the nation’s financial standing.” President Roger Johnson says the measure leaves a $1.5 trillion hole in the federal budget that some members of Congress will want to fill with farm program and entitlement spending cuts.

One farm policy specialist questions that a new farm bill can be advanced in 2018. Jonathan Coppess with the University of Illinois told Brownfield that the tax bill’s predicted impact on the national deficit likely will mean less money for the farm bill.

“What we’ve learned from past farm bill discussions is those kinds of budget pressures or anything that creates budget pressure really creates a challenge for a farm bill and the politics of making changes to farm assistance, dealing with the supplemental assistance program and things like that,” Coppess said.

Farm bill work also could be delayed if Congress picks up the welfare reform discussion in this new year, and the fact that 2018 is a midterm election year will further complicate matters. That’s why House Ag Committee Chairman Mike Conaway, R-Texas, and others have said they want to move as quickly as they can on the bill in early 2018 to get a jump on things before election season takes over. After three years of hearings and listening sessions nationwide, “we’re ready to go,” Conaway vowed last month.

Budgets will be tight, and Coppess stressed that coalitions probably will be the most effective way for farmers to highlight the most important aspects of the farm bill and improve policies like the Supplemental Nutrition Assistance Program and crop insurance.

With some predictions calling for $14-per-hundredweight milk in the year ahead, strengthening dairy farmers’ safety net is another priority in the next farm bill. The U.S. House of Representatives last week approved a disaster aid package that eliminates the $20 million annual cap on the Livestock Gross Margin program, enabling the U.S. Department of Agriculture to offer coverage to more farmers in the current LGM program and provide new risk management options.

“As the bill moves forward, dairy farmers still badly need changes to the ineffective dairy Margin Protection Program, and we strongly urge the Senate to include such changes when it takes up the disaster bill,” said National Milk Producers Federation President and Chief Executive Officer Jim Mulhern. “We support the efforts of Sens. Patrick Leahy, D-Vt., and Debbie Stabenow, D-Mich., to include MPP improvements in the final supplemental spending bill. Combined, these actions can help pave the way for making final fixes to the dairy safety net program in the upcoming 2018 Farm Bill.”

Minnesota Gov. Mark Dayton laid out his priorities for the 2018 Farm Bill in a Dec. 19 letter to Minnesota’s congressional delegation and said stakeholders across the state, where agriculture means $90 billion in annual economic activity, want legislation that “focuses on fostering a robust farm and rural economy, maintaining a strong nutrition title and prioritizing conservation and water quality programs.”

Those are all worthy goals with which few could argue. Indeed, there’s a lot riding on the 2018 Farm Bill, especially in light of the less-than-rosy market prognostications, and farmers can’t be bashful about making their wishes known with policymakers.

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