HERSHEY, Pa. — Judging by the mostly upbeat tone exhibited Tuesday by Pennsylvania Farm Bureau President Carl Shaffer, it sounds like farmers have a lot to be thankful for as Thanksgiving approaches.
“Pennsylvania farmers have had some really good accomplishments at the state Legislature this year,” he said, pointing to bills allowing larger implements on roads and getting farmers exempt from the state’s inheritance tax, among others.
But many issues remain that he warns could leave farmers lighter in the pocket if the federal government doesn’t act before the end of the year.
Meeting with members of the press at the Farm Bureau’s annual meeting at the Hershey Lodge and Convention Center, where he was elected to a fifth consecutive two-year term as president, Shaffer said the impending “fiscal cliff,” which includes a variety of spending cuts and tax increases set to go into effect Jan. 1, would also result in higher estate taxes and higher capital gains taxes.
The estate or death tax is currently set at 35 percent and exempts estates up to $5 million in value.
But come Jan. 1, the rate will increase to levels not seen since the early 2000s, climbing to 55 percent with exemptions applying only to estates with values up to $1 million.
“Really, $1 million isn’t a lot of land on a farm today. So it’s not going to only impact larger farms. This could impact a lot of smaller farmers, and pretty dramatically if that 55 percent tax increase stays in there,” Shaffer said.
Along with that, capital gains taxes are scheduled to increase from 15 percent to 20 percent, which will hurt farmers when they sell assets that have gained in value, Shaffer said.
Another tool that farmers use come tax time, bonus depreciation, which allows them to deduct up to 50 percent of the cost of machinery from that same year’s tax return, is also scheduled to expire and revert to rules that will require farmers to deduct depreciation over several years.
The government inserted the bonus depreciation provision in the tax code as an incentive to get more owners to invest in their businesses.
Taxing issues aside, though, the passing of a new Farm Bill, since the 2008 version expired at the end of September, is seen as the single most important piece of legislation affecting farmers nationwide.
When it comes to Pennsylvania farmers, Shaffer said enhanced risk protection programs are critical. He said he supports expanding crop insurance to include more crops and getting new risk management policies in place for dairy farmers to insure against low milk prices.
The Milk Income Loss Contract (MILC) provides a payment to dairy farmers once prices drop below a set level. But the program expired at the end of September and it might not be included in a new Farm Bill.
“We are getting to such a high level of risk when we put a crop in the ground that we need some kind of risk protection product because the stakes are getting so big now,” he said. “Before, when inputs were down, farmers could absorb a disaster or drought. Not now, there is too much risk. One severe year can be really bad.”
For the most part, farmers had a good year at the state Capitol in Harrisburg.
They will soon be allowed to drive implements at night, legally, albeit with enhanced safety standards. And when farmers want to officially include sons or daughters in the business, they will no longer be subject to the 2 percent realty transfer tax.
“There were some pretty significant victories. A lot of good things take a long time,” Shaffer said.
But the new year will come with new goals.
Shaffer said he hopes the state will consider further changes to the state’s transportation law, allowing farmers an exemption from having to get a commercial driver’s license and from having to keep driver’s logs and do pre- and post-trip inspections of their trucks.
He also hopes a fair dealer’s act will get passed in 2013 and that the federal government will finally take up immigration reform, even if only for people currently in the country.
“This would deal with people already here and, hopefully, we can get it done,” he said.