Tax relief measures for American Agriculture

Speaker: Leon Graves
Subject: Urging tax relief measures for American agricultur
Venue: Members of Congress
Date of Speech: February 26, 2001

February 26, 2001

Dear Members of Congress:

On behalf of the commissioners, directors, and secretaries of agriculture in the fifty states and four territories, I urge your consideration and incorporation of the following tax relief measures for American agriculture as you contemplate a tax relief plan for the United States.

Tax relief serves to lessen financial constraints on family-owned and family-operated operations, including farms, ranches and agribusiness enterprises. And, trends are showing that fewer and fewer enterprises are being passed from one generation to another.

As you know, American agriculture has faced bleak economic conditions in recent years and that trend is expected to continue. We believe that work must be done on many fronts - through risk management, farm and trade policy, new technology, and tax relief – to ensure that we provide farmers and ranchers the tools they need to survive natural and economic disaster situations and to create a profitable future.

We are also concerned about recent news reports indicating that targeted cuts may be made to USDA marketing and export programs in order to pay for an overall tax relief plan. We urge you to fully fund USDA marketing and export programs.

Estate taxes for family farmers should be eliminated. Estate taxes have contributed to the gradual extinction of the "family business." As enterprises are passed on, beneficiaries are forced to sell large portions of land, machinery or other assets to simply pay the taxes. The results are that many operations are forced to liquidate some assets or are forced out of business altogether.

Taxes paid on capital gains prove to be disincentives for agricultural producers. Agricultural operations require large amounts of capital to operate efficiently and that efficiency is taxed away through high taxes on capital gains. NASDA recommends that Congress enact a $500,000 capital gains tax exemption on farm assets, similar to the $500,000 homeowner capital gains exclusion. This exemption should also be indexed to reflect inflation.

Further, NASDA supports a $500,000 capital gains tax exemption on gains realized from the sale of an agricultural land preservation or conservation easements or development rights and the creation of a law to exempt the sale of development or conservation easements and development rights from triggering the recapture provision of the special-use valuation regulation.

NASDA also recommends the creation of an expanded agricultural savings account (ASA) program for American farmers and ranchers. Under the program, a farmer or rancher can defer agriculture production revenue to an ASA after a minimum of $10,000 taxable income from agriculture production, or 5% of gross agriculture revenue, whichever is higher. ASA account dollars would be taxable only in the year of withdrawal, have no time limitation, and able to be converted to a retirement account when a producer retires. Non-taxable withdrawals would be allowed for education and medical purposes only of self, immediate family, dependents and employees and all other provisions as provided for in IRA's. NASDA supports increasing the limit to $10,000 on IRA's for farmers and ranchers.

We also urge your consideration of NASDA's entire agriculture tax relief package, which includes:

Eliminating self-employment taxes on income from rent of farmland, including CRP rents.
Enabling farmers who have gross income of $2,400 or less be able to report $1,600 as net earnings from farm self-employment.
Providing a 100% income tax medical deduction for farmers and ranchers, including all health insurance premiums and medical surgery for self, immediate family, dependents and employees. Prescriptions, Medicare and medical supplies should also be tax deductible.
Increasing annual capital expensing of depreciable assets up to $25,000 or 20% of a farm's gross revenue, whichever is higher. This provision should be indexed for inflation.
Eliminating the marriage tax penalty.
Providing self-employed persons the ability to claim one-half of their social security taxes as a business expense.
Adding language to the Interval Revenue Code, which would allow farmers and ranchers to receive a 100% tax credit in commodities donated to 501 (3)(c) organizations at cost of production. This provision should also allow for tax credit on the cost of transporting a commodity to a 501(3)(c) organization.

Providing 20% incentive tax credits for:

environmental/conservation improvements expenditures
agricultural research directed by agricultural producer committees to include new crops, agriculturally-derived alternative energy sources, and new value-added products
young farmer and rancher program contributions
education and promotion of U.S. grown products

The tax relief measures we have suggested in this letter are fiscally prudent and responsible and, we believe, will significantly benefit American agriculture. We urge your strong consideration of our proposal and encourage you to include these measures in your tax relief package.

Sincerely,

Leon Graves
President