Farms and ranches need tax relief now. That’s what a South Dakota farmer told the House Ways and Means Subcommittee today, asking them to consider a permanent tax code that boosts the agricultural economy and frees them to reinvest in their businesses.
“Farmers and ranchers operate under tight profit margins, often for rates of return that are modest compared to other businesses,” said Scott VanderWal said. “Our businesses are also cyclical where a period of prosperity can be followed by one or more unprofitable years.”
Farming is challenging under the best circumstances, with uncontrollable weather, disease outbreaks and unpredictable markets, said VanderWal, who also serves as vice president of the American Farm Bureau Federation and president of South Dakota Farm Bureau. On his family farm in Volga, South Dakota, VanderWal has seen the price of corn go as high as $7.60 per bushel to as low as $2.80 per bushel in the last 10 years. Nationwide, net farm income has been cut nearly in half since 2011.
“Reducing effective tax rates is the most important thing that tax reform can do to boost farm and ranch businesses,” said VanderWal. “Every dollar that we pay in taxes is a dollar that could be reinvested back into our farm, help lift my community, and contribute to a robust agricultural economy.”
That’s an investment the U.S. economy can’t afford to lose: In 2015, agriculture and related industries contributed $992 billion to U.S. gross domestic product and provided about 11 percent of U.S. employment.
While emphasizing the importance of lower tax rates, VanderWal also urged lawmakers to consider the broader impact of tax provisions on the effective rates farm and ranch families pay.
“Because our profit margins are tight, we are more likely to fall into lower tax brackets,” he said. “Tax reform plans that fail to factor in the impact of lost deductions, credits, and exemptions for all rate brackets could result in a tax increase for agriculture.”