Farmers watching tax cut decision with interest

December 14, 2010|By JEFF SEMLER | Special to the Herald-Mail

Probably by the time you read this, the folks in Washington will have stopped bickering if only temporarily and will have resolved the short-term tax questions.

My guess is they will do just as their predecessors did, and that is shove it on up the line. They will pass an extension and thus the next Congress or the one after that will have to deal with it, and probably when my grandchildren are taxpayers, they will still be living under an extension of some kind.

The problem isn't whether we should pay taxes or even if we are giving tax breaks to millionaires. The problem is the tax code, period. Alan Simpson and Erskine Bowles have said as much in their deficit-reduction plan.

So what does any of this have to do with agriculture besides the fact that farmers pay taxes like every other American?

It is the estate tax piece that is the possible cause for concern. Farmers are small businesses, and small businesses are usually damaged by estate or "death" taxes.

If the CEO of General Motors dies, his estate tax liability will only affect whether or not his grandchildren's spoon will be gold or silver, but for a farmer's heirs, it could very well result in having to sell the farm to pay the taxes.

I know some lawyers somewhere are about to have a stroke because they are thinking ‘doesn't this idiot know about corporate structuring and trusts, etc?’ Well, actually, this idiot doesn't have a great knowledge of it, but we should not have to build an industry or enrich others just so we can pass on a farm to an heir who has probably been working on said farm for most of their life anyway.

My real point or concern here is the growing disconnect of people, and by extension, politicians, from their food supply and how agriculture works. It was driven home in an article by John Maday of Drovers that I read titled "The Gift That Keeps on Giving." It talked about a recent news conference with regard to the fact that the estate tax rate could revert to a 55 percent maximum rate on estates valued at $1 million or more, and how it is critical for saving family farms across America.

Because agriculture is a capital-intensive business and many farmers own land, it does not take long for a farm estate to bump $1 million.

This is especially true here on the doorstep of the nation's capital, where our land prices are inflated because of land-use pressures other than agriculture.

One of the questions asked of the panel of agriculture leaders emphasizes my point. A business reporter asked whether the issue is one of farms vs. jobs. If the estate tax forces a farm family to sell its land, he asked, and developers install a golf course or retail properties, will that not bring more jobs to the community than the farm?

The panelists first pointed out the obvious: the golf course or strip center does not produce food. Secondly, while the golf course will employ more people, it does not have the multiplier effect that a farm does. Using corn flakes as an example, a box of Kellogg's Corn Flakes retails for about $4 for an 18-ounce box. Upon calculation, there is about 10 cents worth of farm gate corn in each box. The other $3.90 goes to the multiplier effect.

This multiplier effect means the trucker, the broker, the miller, the grocer and even the neighbor girl that works at the checkout get paid. All of these dollars stay in the U.S. and some are even retained locally.

A point that the panel didn't make is the irrigation cost of the golf course. Few Maryland farms irrigate, and here in our valley, the number is even smaller, yet I have never seen a golf course that was not irrigated, and as pointed out, they don't produce any food. If the irrigation water is from drilled wells, then there is an effect on groundwater reserves and we live in an area where a great portion of households use groundwater.

So am I saying I think farmers should not pay taxes, income, estate or others? No. I am saying food production is important for national security and thus deserves some consideration when it comes to tax law.

Enjoy your corn flakes, and don't forget the milk.

Jeff Semler is an Extension educator, specializing in agriculture and natural resources, for the University of Maryland Extension. He is based in Washington County. He can be reached weekdays by telephone at 301-791-1404, ext. 25, or by e-mail at

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