Expiration of the TCJA could impact farm and ranch operations
With the 2017 Tax Cuts and Jobs Act (TCJA) expiring at the end of next year, the National Cattlemen’s Beef Association (NCBA) is kicking off a major push on tax policy.
During an episode of NCBA’s Beltway Beef podcast, dated Oct. 18, NCBA President and Wyoming Rancher Mark Eisele explains why the fight for lower taxes is so important.
Eisele shares his personal story on taxes with podcast Host Hunter Ihrman and how a large tax bill almost ended his lifelong dream of ranching with his family.
He delivers a powerful message about how policymakers should address agriculture’s unique tax needs and support the economic success of America’s producers.
Understanding the TCJA
The TCJA was a major overhaul of the tax code, signed into law by former President Donald Trump in 2018, and included some of the biggest changes to the tax code in three decades.
While the corporate tax rate reductions created in the TCJA were permanent, some changes to federal individual income and estate tax policies were temporary and are scheduled to expire in 2025.
According to the February U.S. Department of Agriculture (USDA) Economic Research Service (ERS) report written by USDA Research Economist Tia McDonald and former ERS Senior Research Economist Ron Durst, the changes would affect 97.6 percent of family farms.
The authors estimate, with the expiration of the temporary provisions of the American Rescue Plan Act and TCJA, farm households’ federal income tax liabilities would increase by $8.9 billion and estate tax liabilities would increase by $647 million the year following expiration.
The change in tax liabilities varies by farm size and for groups of farmers considered underserved by USDA programs, the ERS states.
The report continues, “The sunsetting provisions which would have the largest impact on farm households, on average, are those provisions providing reduced individual income tax rates, an increased standard deduction, a cap on state and local tax deductions and the elimination of the personal exemption, which would result in an increase in total tax liability of $4.5 billion for all farm households.”
The largest farms would experience the largest increase in estimated income tax liability measured in dollars, and the largest increases in percentage terms would fall on farm households with moderate sales, states the ERS.
The second-largest impact, estimated at $2.2 billion, would come from the expiration of the qualified business income deduction of 20 percent on profits passed through to households from farms and other businesses not organized as corporations.
The USDA estimates about 45 percent of farm households benefit from this deduction.
NCBA tax survey results
On Oct. 8, the NCBA released a report analyzing data collected in a nationwide tax survey of America’s cattle producers.
With the 2017 TCJA set to expire, NCBA collected survey data to better understand how key tax provisions, such as Death Tax relief and business deductions, impact family-owned cattle operations.
“When I was starting out in the ranching business, I saw the devastating impact of the Death Tax firsthand, and this tax nearly killed my dream of ranching with my family,” states Eisele in the NCBA press release. “This experience pushed me to fight for lower taxes on farms and ranches, and the data collected by NCBA shows many other producers around the country have faced similar pressure from devastating tax bills too.”
“I urge our policymakers to see the story this data is telling – farmers and ranchers need lower taxes to stay in business and continue feeding the world,” he adds.
The respondents to the tax survey indicated 99 percent operated family-owned farms or ranches, and 64 percent were third-generation cattle producers or more.
The NCBA survey results showed strong support for provisions such as the 1031 Like-Kind Exchange, Section 179 Expensing, Bonus Depreciation and Section 199A Small Business Deduction.
The data also showed a quarter of respondents spend more than $10,000 annually for tax preparation, filing and potential audits, all expenses which only add further pressure to agricultural operations.
In the same press release, NCBA Executive Director of Government Affairs Kent Bacus states, “Farms and ranches are unique small businesses, and they face a variety of challenges our tax code must address. The survey data shows strong support for tax provisions to help cattle producers reduce their taxes and invest in essential assets for running a successful cattle operation.”
Bacus continues, “To protect our farming and ranching heritage, we need Congress to step up and back tax provisions which help cattle producers save more of their hard-earned money and set up the next generation of cattle producers for success.”
Melissa Anderson is the editor of the Wyoming Livestock Roundup. Send comments on this article to roundup@wylr.net.
