Amer­i­can Farms and Hillary Clin­ton’s tax pro­posal

Cherokee County Herald - - VIEWPOINTS - By Dr. Gary Wel­ton

Amer­ica’s agri­cul­tural resources are among the best in the world. Amer­i­can farm­ers, or per­haps we should call them Amer­ica’s agribusi­ness pro­fes­sion­als, pro­duce essen­tial fi­nan­cial crops in­clud­ing wheat, corn, beans, grapes, apples, etc. We are all de­pen­dent on their pro­duc­tiv­ity. In­deed, Amer­i­can farm­ers are among the most pro­duc­tive in the world.

In the mod­ern world, farm­ers need to de­velop ex­per­tise and knowl­edge in the ar­eas of me­chan­ics, com­put­ers, botany, bi­ol­ogy, me­te­o­rol­ogy, law, and, of course, busi­ness. They will need to make de­ci­sions about fu­tures, mort­gages, tax op­tions, and es­tate plan­ning. Farm­ing is, I note once again, agribusi­ness. Amer­i­can farm­land was one of the sin­gle best in­vest­ments in the first decade of this cen­tury. Re­cently, how­ever, prices are down. For ex­am­ple, ac­cord­ing to the Pur­due Agri­cul­tural News, farm val­ues in In­di­ana have fallen about 13 per­cent in the last two years.

This de­cline is due, in part, to fall­ing com­mod­ity prices. Soy bean prices are down 45 per­cent since they peaked in 2012. Corn prices are down 56 per­cent. Most busi­nesses in Amer­ica could not sur­vive a 50 per­cent price de­cline. In ad­di­tion to these cur­rent chal­lenges, farm­ers also need to en­gage in es­tate plan­ning. They need to eval­u­ate the ex­tent to which their as­sets will be sub­ject to es­tate taxes, as they seek to main­tain their acreage, the sin­gle most im- por­tant as­set of most farm­ers.

This re­quires wise and in­formed es­tate plan­ning. Well, good luck with that. Good plan­ning re­quires a cer­tain level of pre­dictabil­ity. Es­tate tax rates in Amer­ica, how­ever, have his­tor­i­cally been any­thing but pre­dictable. It was rec­om­mended to some rich Amer­i­cans that they plan their death for 2010, for that year there were no fed­eral es­tate taxes. Over the previous 10 years, ei­ther the de­ductible amount or the tax rate changed al­most ev­ery year.

This level of un­pre­dictabil­ity was ad­dressed by the Amer­i­can Tax­payer Re­lief Act of 2012. This act was passed with bi­par­ti­san sup­port (un­usual dur­ing the Obama ad­min­is­tra­tion). The Se­nate passed the bill 89-8; the House passed the bill 257- 167. As one source de­scribed it, “the Amer­i­can Tax­payer Re­lief Act of 2012 was passed, which per­ma­nently es­tab­lishes an ex­emp­tion of $5 mil­lion (with in­fla­tion ad­just­ment).”

Ex­cept that Hillary Clin­ton is propos­ing to both re­duce the ex­emp­tion and in­crease the tax rate. I am sure that most Amer­i­cans would see the fig­ure $5 mil­lion (which be­comes $10 mil­lion for a cou­ple) and con­clude that rich Amer­i­cans ought to be will­ing to pay a death tax. For small busi­ness own­ers (such as agribusi­ness pro­fes­sion­als), how­ever, fi­nan­cial pro­duc­tion and sur­vival of­ten re­quires sig­nif­i­cant as­set hold­ings. For farm­ers, that pri­mar­ily trans­lates to acreage.

Dr. Gary L. Wel­ton is as­sis­tant dean for in­sti­tu­tional as­sess­ment, pro­fes­sor of psy­chol­ogy at Grove City Col­lege, and a con­trib­u­tor to The Cen­ter for Vi­sion & Val­ues. He is a re­cip­i­ent of a ma­jor re­search grant from the Tem­ple­ton Foun­da­tion to in­ves­ti­gate pos­i­tive youth de­vel­op­ment.

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