President-elect Donald Trump has been talking with lawmakers this week and says that extending his tax cut package from his first term will be a top priority when he is sworn in.
USDA’s Economic Research Service predicts that if those tax cuts expire with no new deal, it would have a $9.5 billion impact on farm families.
According to economist Tia McDonald, “The combined effect of expiring tax rates brackets while removing the SALT cap, the State and Local Tax cap, reducing expiration would reduce the standard deduction while reinstating the personal exemption. So, we combine these together because they’re so interrelated, and this is going to have the biggest impact at almost $4.5 billion increases in tax liability and the reason for that is that it touches almost every farm household. So, the reach is quite broad.”
While majority of farm country will be impacted by those changes, the expiration of the Qualified Business Income Exemption is only anticipated to affect those with a positive business income.
McDonald says that includes approximately 40% of low-sale farms and 80% of large farms.
“The change in average tax liability in dollar terms follows a similar pattern, with low-sales farms on average expected to see a $700,000 increase in taxes, while very large farms are expected to see an increase of around $87,000. In percentage terms, again, it’s the moderate sales farms that would see the biggest increase in tax liabilities of 20% and throughout the rest of our report. That’s a common theme in terms of percentage increase in tax liability that moderate sales farms, on average, would see the highest percentage increase,” she explains.
Other tax exemptions set to expire included the Child Tax Credit and the Estate Tax Exemption.
The expiration of each of these is expected to affect farm households across the country.
“Across all farm households tax liabilities are expected to increase by, you know, just on average $2,200 or 12% from expiration on these specific provisions,” she adds. “But this differs across farm size. So the dollar amount of tax increases estimated to increase with farm size where taxes for low sales farms, low sales farms are expected to increase by about $700, whereas taxes for very large farms are expected to increase by about $28,000.”
McDonald says that moderate sale farms are actually expected to have the greatest increase in tax liability by percentages at nearly 16%.
