OSAGE BEACH, Mo. - Missouri Farm Bureau President Blake Hurst and U.S. Rep. Vicky Hartzler, R-Harrisonville, expressed support Sunday for congressional tax reform efforts and believe they will help farmers, but questions remain about how the legislation will impact farmers.
Hurst and Hartzler spoke to the News Tribune at the Missouri Farm Bureau's annual meeting in Osage Beach. Hurst said the estate tax, which could be eliminated by the tax plan, hurts farmers, while Hartzler said steps will be taken to avoid cuts to farm subsidy programs.
During his address last week in St. Charles, President Donald Trump said he wants Congress to eliminate the estate tax, also known as the death tax, to make it easier for farmers and small-business owners to pass businesses and property on to their heirs.
The estate tax affects approximately 5,000 families per year - less than one in 550 of the 2.6 million people who died in 2013, according to the Tax Policy Center Urban Institute and Brookings Institution. The estate tax applies only to assessed stocks, property or other assets worth more than $5.49 million, or $11 million per married couple, with a top tax rate of 40 percent.
The House tax reform bill, passed in mid-November, would eliminate the estate tax entirely in 2024. The Senate bill, passed early Saturday morning, keeps the estate tax but raises the threshold so people don't pay taxes on the first $11 million.
In 2015, more than 40 percent of estate taxes were paid by estates with gross values of more than $50 million, according to the Wall Street Journal. Hurst said the estate tax affects far more than 5,000 people because it forces farmers to run their businesses in ways that allow them to get around the estate tax.
"That number is the number of people that pay the estate tax," Hurst said. "The number of people that have to pay lawyers at $300, $400, $500 per hour in order to organize their estates in a way that the estate tax doesn't affect them would be dozens of times higher."
Hurst said this leads to inefficient business practices.
"We take all sorts of steps that may not be good business decisions that are aimed at avoiding estate taxes," Hurst said. "So if you raise the limit on when they go into effect, or you do away with it, then you let farmers make decisions that make good farm sense."
Sen. Susan Collins, R-Maine, told the Wall Street Journal in October the problem has been taken care of over the last several decades because of increases to the estate tax exception under President George W. Bush and President Barack Obama.
The American Farm Bureau Federation describes itself as the largest farm organization in the United States. Hurst said Missouri Farm Bureau supports the Senate tax reform bill overall. Still, the second-largest farm group in the country thinks the tax reform bills could hurt farmers more than they could help.
National Farmers Union President Roger Johnson told trade magazine Successful Farming in November that the tax bills could force cuts to or wipe out farm subsidies.
The Republican tax plan cuts the corporate tax rate from 35 percent to 20 percent. The House tax plan also cuts the number of tax brackets from seven to four. The Senate bill keeps seven tax brackets but cuts the rates at most levels and raises the income level to qualify for brackets.
Both tax plans would add at least $1.4 trillion to the national deficit, according to the non-partisan Congressional Budget Office. Because of that, spending cuts could be triggered by the PAYGO - pay-as-you-go - law, which requires automatic spending cuts to many mandatory programs for any bill which reduces taxes and doesn't offset them with revenue increases elsewhere.
House Majority Whip Stenny Hoyer, D-Maryland, said the law could force reductions in programs that help farmers.
"PAYGO will result in the complete elimination of all funding to dozens of mandatory programs next year, from assistance to farmers to border enforcement," Hoyer said in a news release.
"That would be a disastrous trade," Johnson told Successful Farming.
Johnson also told the magazine the tax reform bills could result in elimination of farm safety net programs like the Agriculture Risk Coverage program, which provides farmers with protections against changes in market conditions, and the Price Loss Coverage Program, which makes payments to producers if a crop's price is below its reference price.
"In the case of the tax bill, current law could require 100 percent sequestration of all commodity program payments and other farm bill programs," Johnson told the magazine.
Hartzler isn't convinced PAYGO would be triggered.
"There's always been steps taken to stop that from going into effect, and I'm sure that would happen in the future as well," Hartzler said.
The House bill also eliminates Section 199 tax deductions, which give a 9 percent tax break to many manufacturers. The deduction covers proceeds from the sale of agriculture products produced, grown or extracted by farmer cooperatives or marketed by farming cooperatives.
Farm co-ops commonly pass this deduction down their members. The National Council of Farmer Cooperatives, which is leading the charge against this change, says on its website this deduction alone supports 250,000 jobs and creates $8 billion in wages. Approximately $2 billion is transferred to rural communities through this deduction, the group said.
"The elimination of the Section 199 deduction for agriculture increases the tax burden on farmers and their co-ops," NCFC CEO Chuck Conner said in a news release. "In a time of continued low commodity prices, those hard-working Americans who grow our food can ill afford for Congress to pass a law that will raise their taxes."
Hartzler voted for the House tax plan. The House bill would eliminate the deduction, but the Senate bill would keep it in place.
Hartzler said many individual concerns would be addressed in conference committee as the bills are reconciled.
Hurst said he hopes the deduction is left intact in conference committee.
"We don't know what's going to happen, but we would be in favor of the Senate provision that keeps it there," Hurst said.