Michigan farmers remain cautiously optimistic with the recent House Ways and Means Committee tax reform package, officially labeled the The Tax Cuts & Job Act. Calling it long-overdue, Michigan Farm Bureau (MFB) President Carl Bednarski, a Tuscola County row-crop farmer, says the organization is encouraged that Congress has taken “the first-steps” to tax reform.
“Michigan farmers will continue to work with members of Congress on a solution that provides for long-term certainty for all taxpayers,” Bednarksi said. “We’re glad to see many agricultural priority issues such as Estate Taxes and cash accounting addressed in the proposal. We will continue to evaluate specific tax reform details as it moves through the full House to ensure it doesn’t unfairly burden Michigan farmers.”
The House Ways and Means Committee is expected to continue marking up the tax proposal, section by section, according to MFB National Legislative Counsel John Kran, adding that the full House could see a bill as soon as mid-November.
“This is an opportunity for Committee members to make changes to the bill or debate things they’d like to see updated,” Kran explained “We expect a bill to be released in the Senate in coming days as well. President Trump has publically stated he wants to see a bill through the House by Thanksgiving and to his desk by Christmas.”
According to Bednarksi, MFB members have approved tax reform policy that embraces a number of key principles:
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Effective tax rates – Farm Bureau supports lower tax rates but will measure any tax reform plan by the degree to which it lowers effective tax rates paid by farmers.
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Continued Deduction for business interest - loss of the interest deduction would harm farmers’ liquidity, make it harder for them to purchase land and production inputs and could lead to stagnation in the agriculture sector. The bill would limit deductions to businesses with gross receipts under $25 million.
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Estate tax repeal - Farm Bureau believes that tax laws must protect, not harm the family farms that grow America’s food and fiber. Our nation’s estate tax policy can be in direct conflict with the desire to preserve and protect our nation’s family-owned farms and ranches. The bill doubles the estate tax exemption starting in 2018 and permanently repeals estate taxes after six years. Stepped-up basis is continued. The current estate tax exemption is $5.49 million per person.
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Capital gains tax – Long-term capital gains are taxed a lower rate to encourage investment in farms and businesses that grow our economy, create jobs and in recognition that these investments involve risk. The bill is silent on capital gains tax rates. Under current law, taxpayers in the 10 and 15 income tax brackets pay no capital gains taxes. Those in the 25, 28, 33 and 35 percent brackets pay a 15% rate on their capital gains; and those in the top 39.6% bracket pay 20%.