As you’ve probably heard, on New Year’s Day Congress passed a fiscal deal to avoid the so-called fiscal cliff. I won’t go on a rant about my taxes going up (see? I just get a job and this is what happens!), but instead, I want to update everyone about how this deal impacts agriculture.
It does so in two super important aspects: the Farm Bill and the estate tax.
First, the Farm Bill.
There was some worry about a looming “milk cliff.” Essentially, the current supports for milk expired with the 2008 Farm Bill. If no legislation replaced those price supports, the cost of milk was set to at least double due to the 1949 farm bill going back into effect. Essentially, the problem is this:
“Under the ’49 law, the Agriculture Department is required to begin buying up dairy products at a rate of $38.54 per hundredweight, more than double the prevailing price today. No one truly knows the immediate impact, but the threat of $6 to $7-a-gallon milk prices brought President Barack Obama off the sidelines last week and helped to drive the last-minute dealing alongside taxes.” (Source: Politico.)
However, the fiscal deal has extended the 2008 Farm Bill for the next 9 months. While that should get us (almost) through another farming season, it also means the farm bill is back on the table. Expect to see a whole new round of lobbying efforts and political grandstanding. According to Politico, this could turn out really bad for farmers. Our bargaining power is weakened now due to the spending cuts and higher taxes. Congress will not be in a very giving mood (funny, feels like they give to everyone these days…).
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Second, the estate tax. Remember, on January 1, 2013 the existing estate tax rates were set to expire. It would mean that the shelter rate would go from $5million down to $1million, and anything over would be taxed at 55%, which is up from 35%. (If that doesn’t make too much sense, try reading my article, The Estate Tax 101, to get up to speed.)
The fiscal deal stopped that nightmare scenario from happening, but we do have a modification. Now, estates are still sheltered up to $5million, but anything over is taxed at 40%. Not great, but better than the alternative.
Where do things go from here? I would assume the estate tax talk will be dead until the new rates are set to expire (and right now I’m not so sure when that is). On the other hand, the Farm Bill discussion will get totally heated up again. Lovely.
