Farm Group Questions Effect of Tax Reform


Renee Jean, Williston Herald


The U.S. Senate passed a tax bill in the early morning hours on Saturday that proponents said would put more money in the hands of middle class Americans, but the president of the state’s largest farm group said there are serious questions as to how the bill is going to play out for the agricultural sector long-term.

“The takeaway from the farmer’s perspective, is that we may see a little bit of a break on the one side with income taxes lowering, but we may lose all that back with the loss of things like the 199,” North Dakota Farmers Union President Mark Watne said.

The bigger concern, Watne said, is long-term. Multiple projections show the tax proposal will add from $500 billion to $1.5 trillion to the deficit.

That would trigger sequestration, and mandatory spending cuts on discretionary programs, a large proportion of which are military spending and Farm Bill programs.

Watne said he doesn’t see cuts to military spending as all that likely, and if Medicare and Social Security are too hot to handle, that will leave the Farm Bill as the likely target.

“I’m very concerned about the pot of money we will have available to write farm bills,” said Watne. “The baseline for farm bill funding has been cut already by $100 billion over the past 10 years. It’s too low of a benchmark to begin with and we can’t afford to slash farm programs, like crop insurance, to fund tax cuts. That would be disastrous for agriculture and for our country.”

Republican party members are downplaying the possibility that the tax bill will trigger pay as you go rules, commonly referred to as PAYGO.

“We believe lower taxes will stimulate the economy,” Sen. John Hoeven, R-N.D., said. “Look back through history. As we cut taxes you see more economic growth.”

The Joint Committee on Taxation, however, accounted for some economic growth in its projection, and said the proposal still adds  $1 trillion over 10 years to the deficit. The more conservative Tax Foundation, gave a more generous amount to economic growth, but also came back with $500 billion added over the same period.

The Senate bill passed 51 to 49. The closeness of the vote leaves little wiggle room in reconciliation talks between the House and Senate on their individual bills.That means the final bill is likely to adhere more closely to the Senate version than the House.

The Senate bill does contain some things that Sen. John Hoeven said would help farmers.

Among these, the legislation would increase the deduction for small businesses and farm operations that are set up as partnerships or pass-through entities to 23 percent. The legislation also doubles the estate tax exemption, and it expands Section 179 for expensing equipment.

It will allow full expensing or writing off for the cost of new investments for the first five years, which is then phased down over an additional four-year period.

The bill failed to extend Section 199,  which is the Domestic Production Activities deduction, used by many agriculture co-ops. Through that, nearly $2 billion annually is passed back to farmers, which they can then deduct from their farm’s tax burden.

Hoeven had an amendment ready that would retain Section 199, but wasn’t allowed to offer it. A different amendment did make it in that partially protects Section 199, though not as well as Hoeven said he’d hoped.

Still, he was generally optimistic that the overall bill is good for farmers, and optimistic that a complete fix for 199 could be worked out during conference committee.

“The Senate took an important step to provide hardworking, middle-class Americans with tax relief that will enable them to keep more of their paycheck and at the same time lower rates for small businesses, including our farmers and ranchers, so we can grow our economy and create more jobs with higher wages,” said Hoeven. “Now that the Senate has passed its tax relief plan, we’ll go to work with the House to deliver the best possible bill for hardworking Americans.”

Rep. Kevin Cramer, likewise, lauded the bill.

“I congratulate Senate Republicans on putting together a meaningful tax reform bill. Both the House and Senate bills would grow the economy, put more money in the hands of the middle class, and would put farms and small businesses on equal footing with large corporations who have taken advantage of special tax loopholes over the years. Now that both chambers have passed legislation, I look forward to working with my colleagues in conference to reconcile the differences between both bills and emerge with a better final product.”

Sen. Heidi Heitkamp, D-N.D., however, said the bill is not actually tax reform.

“This bill was crafted at the last minute behind closed doors. And it shows — this bill is bad for North Dakota,” she said. “With this legislation, Congress is handing our children a credit card bill with nearly $1.5 trillion of debt — and that’s the best-case scenario.”

Heitkamp said the bill gives large corporations a tax break at the expense of working families and farmers.

“The tax cuts for working families expire in a few years,” she said. “It would hurt North Dakota seniors by cutting $400 billion from Medicare. It puts farm programs and the Farm Bill at risk. It makes it more difficult for young families to buy homes. It will be harder for students to afford a college education. It makes it more complicated for small businesses to file taxes. It will take health care away from 13 million families. Teachers won’t be able to buy the school supplies they need. Nonprofit organizations will receive fewer donations to operate and help struggling families.”

There is also a potential downside for the oil and gas sector, Heitkamp added.

“The bill could force cuts for federal oil, gas, and coal payments to North Dakota by $40 million per year,” she said. “And all the top academics — Republicans and Democrats — say it won’t grow the economy or create jobs in the way Republicans say it will.”