September 29, 2017
By Jeff Helms
MONTGOMERY, Ala., Sept. 29 — Alabama farmers were encouraged by initial details of the much-anticipated tax reform plan unveiled Wednesday by President Donald J. Trump and Congressional Republicans.
Alabama Farmers Federation National Affairs Director Mitt Walker said the organization’s farmer members welcome the proposed repeal of estate tax and other provisions.
“The plan provides a road map for fixing our outdated tax code,” Walker said. “There are many specifics to be worked out, and we will need to watch the process closely to make sure farmers end up in a better position than they are today.”
Notable provisions of the plan include reducing the number of individual tax brackets, lowering the corporate income tax and capping tax rates for small businesses.
American Farm Bureau Federation President Zippy Duvall said comprehensive tax reform is essential to addressing financial challenges faced by farmers and ranchers.
“Farm Bureau is encouraged to see that this framework includes important principles such as lower tax rates for individuals who own businesses, elimination of the death tax and some business interest deductibility,” Duvall said. “Farm Bureau looks forward to working with tax writers to refine the proposal to ensure that tax reform lowers effective tax rates for farm and ranch businesses.”
Trump said the plan will make a “big difference” for farmers, and singled out elimination of the estate tax as an overdue reform.
"We are finally ending the crushing, the horrible, the unfair, estate tax, or as it is often referred to, the death tax,” Trump said.
Walker said capping the small business tax could benefit family farmers. The plan sets the maximum rate for partnerships, sole proprietorships and S corporations at 25 percent. Those businesses are currently taxed at individual rates, which range from 10 to 39.6 percent. More than 94 percent of farmers are currently taxed at these “pass-through” individual rates.
Many details of the plan won’t be available until after passage of the fiscal year 2018 budget resolution. Farm Bureau has analyzed initial provisions versus its policy.
Potentially Positive Provisions:
• Eliminates estate tax.
• Eliminates alternative minimum tax.
• Caps small business tax rate at 25 percent.
• Lowers corporate tax rate from 35 to 20 percent.
• Allows businesses to fully and immediately write off business investments for five years, including machinery and buildings but not land.
• Reduces individual tax brackets from seven to three, and reduces the maximum rate from 39.6 to 35 percent.
• Doubles the standard deduction from $12,000 to $24,000.
• Preserves deductions for charitable contributions and home mortgage interest.
• Increases the child tax credit and provides a $500 credit for non-child dependents.
Potentially Negative or Unknown Provisions:
• Rules governing specific industries will be modernized, but the plan does not mention preservation of cash accounting or like-kind exchanges.
• Partial limitation on the interest deduction for C-corporations. Limitations on the interest deduction for other businesses may be considered.
• Eliminates most itemized deductions.
• Repeals personal exemptions for dependents.
• Tax benefits encouraging work, higher education and retirement security could be forthcoming.
• Does not address elimination of capital gains taxes or lowering of tax rates.