WASHINGTON, D.C. — Along with implementing the new farm bill, one of the biggest issues lawmakers discussed with Ohio Farm Bureau members March 4-5 was tax reform.
U.S. Rep. David Camp, R-Mich., who is chairman of the House Ways and Means Committee, introduced draft legislation Feb. 26 that would create just two income tax brackets — at 10 and 25 percent, while ensuring almost all taxpayers, including farmers and corporations are taxed at no more than 25 percent.
The bill, known as the “Tax Reform Act of 2014, also seeks a more generous “inflation-adjusted” standard deduction for individuals of $11,000 and $22,000 for married couples. The tax credit for a child would increase from the current $1,000, to $1,500.
Weighing in
Representatives shared their opinion of the bill with Ohio Farm Bureau county presidents, during their annual trip to the Capitol, March 3-5.
U.S. Rep. Pat Tiberi, R-Ohio, said the last major tax reform was in 1986. He said the current code is outdated and overly complex.
“Tax reform should be about making the tax code better, simplifying the tax code for Americans, for small business owners, for farmers,” he said. “We believe that is a big step in the right direction.”
U.S. Rep. Paul Ryan, R-Wis., who is chairman of the House Budget Committee and a member of Ways and Means, said the 25 percent tax rate would make U.S. farmers and individuals more competitive with other countries.
Current code, he said, “taxes our producers at much higher rates than our competitors tax theirs. We want to get our tax rates down so that we can be more competitive.”
Farm groups respond
The proposal has already garnered the support of some major farm organizations, including the American Farm Bureau Federation and American Soybean Association. However, even both of these acknowledge that it’s still a draft.
The AFBF called it “a strong and much-needed start to what will surely be an extensive tax reform discussion,” adding that AFBF plans a “careful analysis” of the finer details.
In addition to the rate cap, the bill allows farmers to continue using cash-based accounting versus accrual accounting, regardless of size of operation. ASA supports this exemption, saying that it accounts for the variable nature of farm incomes and crop values across multiple years.
Additionally, the proposal would make expensing deductions under code Section 179 permanent. This provision, ASA said, enables farmers and other small businesses to deduct business-related purchases like equipment and infrastructure.
Some concerns
However, ASA noted one big concern, elimination of the Biodiesel Tax Credit. The association said it believes the biodiesel credit is worthy of extension “given the many benefits it provides, including support for jobs, economic development in rural communities, diversity in our energy sources, and reduction in greenhouse gas emissions.”
Republican lawmakers are unsure how much attention the bill will get this year, but said one thing is clear — it’s a starting point.
U.S. Rep. Jim Renacci, R-Ohio, who is also on the Ways and Means Committee, said little about the bill at this point, other than that it’s a starting point.
“It’s a draft proposal where we’re looking for people to look at the draft and make some comments on it,” he said.
What’s next?
Tiberi said the next step will be more input and hearings on the draft. It will be an uphill battle, as the bill is already facing stern resistance among some lawmakers, including Republicans.
The question on everyone’s mind, Tiberi said, is when will tax reform be done.
“I don’t know, but I know it will get done,” he said. “It may not get done this year, but it will get done. Time is ticking away as we have a tax code that is regressive, non-competitive (and) punitive in many ways.”
