Most people don’t recognize the correlation between the federal estate tax and the U.S. agriculture industry.
But the value of this tax is of extreme importance to owners of family farms and ranches.
The federal estate tax, commonly referred to as the “death tax,” is scheduled to expire at the end of the year. At stake for farm families across the nation are tax exemptions, or relief from tax burdens, that affect their ability to maintain inherited farmland.
More than 90 percent of today’s U.S. farms are family farms.
As defined by the IRS, the death tax is a tax on one’s ability to transfer property. It originated in 1917 to aid in World War I costs.
As it currently stands, when family members inherit a family farm, these individuals incur the same inheritance tax breaks as their predecessor. But if legislation isn’t renewed, these assets will not be transferred. New taxes will be enacted that have the potential to damage the financial security of our country’s farm owners.
If congressional action is not taken, the exemption would drop from $3.5 million to $1 million with a top rate of 55 percent. New proposals that could replace the tax are not indexed for inflation.
“By not indexing the death tax for inflation, we are simply ensuring it’s going to have a negative impact on families, farmers and small businesses in the near future,” said Congressman Aaron Schock, R-Ill.
The issue is heated. Why? This tax generates an estimated $1 trillion a decade for the U.S. economy.
Proponents claim that family-farm owners should be required to pay more taxes on inherited land and that estimates about the potential for economic loss are exaggerated. They reason that the estate tax prevents the perpetuation of wealth and is a better source of federal revenue than the income tax, which is said to directly disincentivize work.
Opponents of the estate tax argue that farm owners are “asset rich but cash poor,” meaning that farm inheritors may have significant documented wealth (land value), but this wealth is used as a tool to perform business and generate profit and cannot be considered as excess money.
Many assert that inheritors are sometimes forced to cede land to afford their newly acquired property taxes.
Escalating land prices easily make the majority of farms and ranches well more than the $1 million exemption, states a NorthernAg.net story. Most farmers and ranchers desire an increased death-tax exemption level and a decreased rate.
“Without some leeway, farm lobbyists argue, portions of family farms — some in the same family for more than 100 years — would have to be sold just to cover the taxes,” states an editorial in Jacksonville's Journal Courier.
In the process, the U.S Department of Agriculture estimates, one in every 10 family farms would face a tax burden when changing hands. The American Farm Bureau Federation has asked for the exemption to be raised to at least $5 million.
“The 2011 change to the estate tax law does a disservice to agriculture because we are a land-based, capital-intensive industry with few options for paying estate taxes when they come due. The current state of our economy, coupled with the uncertain nature of estate tax liabilities make it difficult for family-owned farms and ranches to make sound business decisions,” said Montana Farm Bureau Federation Bob Hanson.
Currently, lawmakers from states with vested interests in agriculture are lobbying for death-tax modifications.
Montana Farm Bureau Federation Young Farmer and Rancher Chair Peter Taylor said, “It’s extremely important that we explain to our senators, the media and the public how this tax will eliminate the next generation taking over America’s productive farms and ranches.”
*Photo obtained from www.michiganestateplanninglawblog.com
To increase the production and use of renewable-energy sources, the United States Department of Agriculture (USDA) is soliciting federal grants for biorefinery projects.
One such project, the Biorefinery Assistance Program, provides guaranteed loans for the development and construction of commercial-scale biorefineries or for the retrofitting of existing facilities (including, but not limited to, wood-products facilities and sugar mills) for the development of advanced biofuels.
“Renewable-energy production is a key to sustainable economic development in rural America,” said U.S. Agriculture Sec. Tom Vilsack. “We must rapidly escalate production of biofuels to meet the 2022 Federal Renewable Fuels standard goal, and much of this biofuel will come from feedstocks produced by America’s farmers and ranchers. This will be an increasing source of income for rural America and it represents an opportunity to increase the number of green jobs available not only to farm families, but also to residents of rural communities.”
Vilsack specifically mentioned feedstocks – crops or products that can be used as or converted into biofuels and bioenergy. Common feedstocks include soybeans and rapeseed while alga and ethanol byproducts are emerging feedstocks.
Farmers of these and other sources of feedstock can benefit from biorefinery developments because of increased market opportunity. However, the advancement of this renewable energy comes with a price tag.
According to a blog at Biofuels Digest, “Because biofuels projects cost in the hundred of millions, the “family member” guarantor of choice in the U.S. is Uncle Sam – the one with the balance sheet and the policy interest to make commercial biofuels happen.”
But programs such as the Biorefinery Assistance Program expand the promise for biofuels in America.
Program Information: - Eligible applicants: Individuals, tribal entities, state-government entities, local-government entities, corporations, farm cooperatives, farmer cooperative organizations, associations of agricultural producers, national laboratories, institutions of higher education, rural-electric cooperatives, public-power entities and other groupings of any of the previous entities
- Loan limits: Maximum of $250 million; no minimum requirement; maximum loan will be reduced by the amount of other direct federal funding the eligible borrower receives for the same project
Eligible projects: - Projects must be located in a rural area (50,000 or less population)
- Projects must use “eligible technology,” which is defined as either:
- A technology that is being adopted in available commercial-scale operation of a biorefinery that produces an advanced biofuel; or
- A technology not described in the previous paragraph that has been demonstrated to have technical and economic potential for commercial application in a biorefinery that produces an advanced biofuel
In 2009, this initiative, and other provisions within the overarching program to stimulate energy development, funded 1,557 projects in 50 states, the territory of Puerto Rico and the Western Pacific Islands, expecting to reduce greenhouse gases by 1.5 million metric tons of carbon. These investments will generate a projected equivalent of 1.5 million kilowatts of electricity.
As America works to develop a clean-energy economy, the use of programs like the Biorefinery Assistance Program, is vital. This program, and others modeled like it, provide rural, green jobs and propel us toward energy independence. They also provide more economic incentive for American farmers to continue the production of feedstock crops.
*Photo obtained from www.clear.certh.gr/img/bio-refinery%201.jpg
May is National Egg Month as well as National Beef Month and both industries are celebrating and promoting their products.
The American Egg Board (AEB) takes time during May to educate consumers about the numerous benefits of eggs. According to AEB, every 235 million laying-birds in the U.S. produces 250 to 300 eggs a year.
The most common egg consumed is the chicken egg, however duck and goose eggs and smaller eggs, such as, quail eggs are occasionally used as a gourmet ingredient as are the largest bird eggs - ostrich.
One of the best benefits to consumers is that the majority of eggs are inexpensive but there is more to eggs than good value. They are also nutritious, easy to prepare, versatile and very tasty.
According to an article by Our Ohio magazine, “Eggs are one way Americans can stay strong as they get older. Macular degeneration – a leading cause of irreversible blindness – is a concern for seniors. Lutein and zeaxanthin found in egg yolks may both reduce the risk for cataracts and help prevent macular degeneration.”
Though most appreciate the taste and health benefits of eggs, the average consumer is unaware of the scope of the egg industry in America.
Facts about the U.S. Egg Industry: (Source: United Egg Producers - UEP)
- Iowa is the top-producing state for eggs, followed by Ohio
- U.S.-egg production during March 2010 was 6.71 billion table eggs
- Flock size for April 1, 2010 was 283 million layers
- Rate-of-lay per day on April 1, 2010 averaged 74.8 eggs per 100 layers, up 1 percent from last year
- 2009 exports of processed-egg products set records in both volume and value
There has been a lot of controversy the last few years regarding cage-free versus caged chickens for egg production, which consumes much of the industry’s efforts.
To address consumers concerns regarding animal welfare, the UEP created a set of guidelines for producers to follow. These guidelines were based on recommendations from an independent scientific-advisory committee commissioned in 1999 to review the treatment of egg-producing hens. The guidelines place top priority on the comfort, health and safety of the chickens and include:
- Increased cage space per hen, which is being phased in to avoid market disruptions
- Standards for non-feed withdrawal molting procedures based from the most current, verified scientific studies
- Standards for trimming of chicks’ beaks, when necessary, to avoid pecking and cannibalism
- Maintaining constant supply of fresh feed, water and air ventilation throughout the chicken house and monitoring for ammonia
- Standards for daily inspection of each bird as well as proper handling and transportation
- Availability of a new training video to instruct producer staffs about the proper handling of chickens to avoid injury to the animals
According to Chad Gregory from UEP, Americans prefer “regular” eggs produced in modern, sanitary caged systems by a margin (based upon their buying-decisions) of 95 percent.
“Modern sanitary cages also help U.S. egg farmers provide low-cost, nutritious eggs to American consumers at an annual savings of $2.6 billion versus non-cage systems,” said Gregory.
A video featuring Mike Rowe of Dirty Jobs explains a little more about this debate: http://www.unitedegg.org/video/player/mikerowe.aspx
Along with the egg industry there is also another American-food favorite - beef.
As the weather starts getting warm, more and more consumers are firing-up their grills for some outdoor cooking. The National Cattlemen’s Beef Association (NCBA) celebrates beef all month long, however the beef industry ha
s been under the gun lately with media reporting about increased meat prices.
According to the U.S. Department of Agriculture (USDA), beef prices have increased 22 percent this year and the National Restaurant Association (NRA) is predicting a 4-to-12 percent increase in the cost of wholesale meat.
In a recent article by the Kansas City Star, there are numerous reasons for the price increases, starting with the main reason - price of oil and the booming ethanol business. This article claims that several Midwestern corn farmers converted their crops to supply the nascent industry.
According to data from the USDA, ethanol refiners are using more of the corn harvest than ever. About 33 percent of last year’s crop will be used for fuel, increased from 23 percent in 2008.
"Ethanol-induced prices in meat are just now getting to the marketplace," said Steve Meyer, the president of Paragon Economics, a meat industry consultant in Des Moines.
Corn and ethanol producers say their industry is unfairly blamed for the record meat costs of 2008. The surge reflected "wild speculation in the markets and the surge of index funds" rather than the jump in corn use for fuel, said Chris Thorne, a spokesman for Growth Energy, a Washington-based ethanol trade group.
Still others argue that increased meat costs are the result of several related issues such as oil prices, global demand and weather, as well as product marketing and labor expenses.
Various corn-related agriculture groups state that there has never been a shortage of corn. There actually is a surplus of corn for all market sectors. According to the USDA, corn farmers produced 13 billion bushels of corn last year - making it a record year.
Yet, despite this meat price issue, people are still buying beef.
Americans understand and know that beef is leaner and healthier today. According to the NCBA, “Lean beef is one of the most flavorful and efficient ways to meet the daily value for 10 essential nutrients like iron, zinc and B vitamins, and beef also provides 20 grams of protein per serving.”
NCBA provides a helpful slideshow that presents the process of beef from production to pasture to plate: http://www.explorebeef.org/raisingbeef.aspx
Like the egg industry, beef is one of our country’s most valuable industries.
Beef Industry Facts (Source: NCBA):
- Beef-cattle production represents the largest single segment of American agriculture
- In 2008, the production of meat animals was responsible for more than $66 billion in added value to the U.S. economy, as measured by contribution to the national output
- Total U.S. beef exports were valued at nearly $3.62 billion in 2008
- In 2008, 26.6 billion pounds of beef were produced
- In 2007, more than 97 percent of beef cattle farms and ranches in the U.S. were family farms
What are your thoughts about cage-free versus caged chickens for egg production? Why do you think meat prices have gone up this year?
*Photos obtained from: http://www.beef.org/ and http://www.incredibleegg.org
Recently, our country’s first offshore wind farm was created six miles from Hyannis Port, Mass., which has renewed interest in the wind-power industry.
Wind power is the fastest-growing energy source in the world and farmers could take advantage of the weather opportunity.
An article in Distributed Energy cleverly titled, “Wind: The easiest crop to harvest,” outlines the benefits of wind farming for our country’s farmers and ranchers.
“Farming is all about maximizing profits and reducing risk. Wind energy does both,” said Patrick Pelstring, National Wind co-chair, the nation's leading utility-scale community wind developer.
For example, farmers can lease land to wind developers, use wind generated from wind turbines located on their farms to power their own farms and/or become wind-power producers to capitalize their land.
“Now we grow corn on the ground and generate power in the air—all on the same piece of property," said Delbert Watson, a farmer in Clear Lake, Iowa, in a Christian Science Monitor article.
Windustry.org outlines the land-lease process for farmers at its Web site.
According to a blog posted at the Union of Concerned Scientists:
“The U.S. Department of Energy's (DOE) "Wind Powering America" initiative has set a goal of producing five percent of the nation's electricity from wind by 2020. DOE projects meant to achieve this goal will provide $60 billion in capital investment to rural America, $1.2 billion in new income to farmers and rural landowners and 80,000 new jobs during the next 20 years.”
Wind farm facts (National Wind)
- Wind turbines are much quieter than most people think
- Each turbine needs a plot of about 100 acres to separate it from other turbines (the actual footprint of each turbine is less than one acre).
- Typical lease arrangements for placement of a 1.5-megawatt turbine on property run between $6,000 and $9,000 a year.
Not only can farmers use wind turbines to supplement their income, but in an industry dependent on the weather, wind farms can also serve as a buffer against unfavorable conditions.
“This allows the farmer to diversify his income and reduce risk,” said Pelstring. “After construction is complete, the practice of farming continues as it has for generations, with the bonus of added financial security.”
Farmers used to diversify their income by adding new commodity crops to their rotation. But now, depending on their wind-assessment results, they could look to wind farming as lucrative earning potential.
*Photo obtained from http://www.ucsusa.org/
