Congressional Clock is Ticking on Priority Ag Issues
America Farm Bureau Federation
Looking ahead to midterm elections in early November, even with a post-election lame duck session, congressional lawmakers ultimately have only a few weeks before the end of the year to wrap up their unfinished business. Farmers and ranchers are hopeful estate tax reform and an extension of a number of expiring tax provisions, among other issues, will be addressed before the clock runs out.
One of agriculture’s top concerns is estate taxes. If Congress doesn’t act, on Jan. 1, 2011, the top estate tax rate will jump from non-existent this year to 55 percent, with only a $1 million exemption.
Farm and ranch families can get hit harder with estate taxes than other small business owners because agriculture takes a lot of capital assets, such as land and equipment, to generate the same dollar in income that another type of business could generate with less, explained Pat Wolff, American Farm Bureau Federation tax specialist.
“When estate taxes cost more money than a farm family has on hand, surviving family partners can be forced to sell land, buildings or equipment to keep their operation going,” she said.
Through the American Farm Bureau Federation’s “Put Death Taxes to Rest” campaign, agricultural producers are calling for a 35 percent top rate and a $5 million exemption, indexed for inflation.
Along with the return of the estate tax, the capital gains tax rate will jump to 20 percent at the beginning of 2011, from the current 15 percent, where farmers and ranchers want it to stay. “Too much of the time, the money growers have to pay in capital gains taxes is money that they would have essentially reinvested in their communities,” said Wolff. She pointed out that the average amount of capital gains farmers and ranchers report is about 50 percent higher than the average taxpayer.
Similarly, with the sunset of the lower individual income tax rate, farmers and ranchers, who typically file returns as individuals, rather than as corporations, could find themselves sending more money to the IRS, instead of putting it back into the production of food, fuel and fiber.
While taxpayers could be ringing in the new year with higher estate tax, capital gains and income tax rates, the sun could set on the ethanol blenders tax credit and the ethanol import duty on Dec. 31. Already expired biodiesel tax incentives also need to be renewed. These provisions are considered critical to a biofuels industry that’s still trying to establish itself.
“High energy costs and the recent Deepwater Horizon oil spill have made it increasingly clear that we have to do everything we can to boost our homegrown, renewable energy sources and reduce our dependence on foreign oil,” Wolff said.
Ethanol producers worry the expiration of their tax credit and import duty could have the same effect as the 2009 expiration of the biodiesel blenders tax credit. Without that incentive to help make the price of biodiesel competitive with conventional diesel fuel, refiners and distributers are opting for the lower-cost conventional diesel.
All of these tax provisions were part of legislation passed in 2001 and 2003. From taxing to spending, Congress has yet to finalize the 12 annual appropriations bills, which fund nearly every aspect of the federal government, including USDA.
“Probably the only certainty in the coming weeks is that lawmakers will pass a continuing resolution to keep the government going,” said Wolff. “While most people expect the continuing resolution to carry through to the middle of October or after Thanksgiving, if lawmakers extend it to the new calendar year, it wouldn’t be the first time.”
Congress approved continuing resolutions through the beginning of the following year in 2003, 2005, 2007 and 2009.
Although they were finalized by negotiators years ago but have yet to be approved by Congress, free trade agreements with Colombia, South Korea and Panama have not slipped farmers’ and ranchers’ minds.
“Every day that goes by without White House support for and congressional approval of these agreements is a loss for U.S. growers who watch farmers and ranchers in other countries gain a foothold in the Colombian, South Korean and Panamanian markets,” said Chris Garza, AFBF trade specialist.
Garza noted that earlier this summer Canada’s Parliament ratified a trade agreement with Colombia.
“It took Canadian lawmakers a year and a half to approve the pact with Colombia,” he said. “Our own agreement with Colombia has languished for more than twice that time.”
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