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Simplifying tax code discussed at subcommittee hearing

South Dakota farmer says farmers need tax code that boosts ag economy.

The House Ways and Means Tax Policy Subcommittee held a hearing, “How Tax Reform Will Help America’s Small Businesses Grow and Create New Jobs," on July 13.

Chairman Peter Roskam, R-Illinois, said in opening comments that the committee is proposing a simplified tax code that works with small businesses.

“First off, we drop the tax rate from 44.6% to 25%. This means more money to hire employees, and this means more money to grow your business," Roskam said.

“Then we simplify the tax code in three main ways," he said. "We eliminate the nonsensical depreciation schedules and replace them with immediate expensing. So when you buy equipment for your business, you write it off, all of it, in that year. Then, we eliminate the AMT so that businesses can know exactly what they owe without having to worry about a second hidden tax code. Finally, we abolish the death tax so that families are never again forced to find a way to pay a 40% tax on their family business or worse yet, sell it off to pay the tax."

Roskam said he looks forward to working with colleagues on both sides on the aisle "to create a tax code that incentivizes small business and grows the American economy.” 

People giving testimony include:

  • Teresa Meares, president, DGG Uniform and Work Apparel
  • Scott E. VanderWal, owner, VanderWal Farms
  • Rebecca Boenigk, CEO, Neutral Posture
  • Chye-Ching Huang, Deputy Director – Federal Tax Policy, Center on Budget and Policy Priorities

VanderWal, a South Dakota farmer, told the committee that farm and ranch families need 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,” VanderWal said. “Our businesses are also cyclical where a period of prosperity can be followed by one or more unprofitable years.”

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.”

In 2015, agriculture and related industries contributed $992 billion to U.S. gross domestic product and provided about 11% 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.”

Source: AFBF, Committee on Ways and Means

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