Grassley Urges Tax Relief for Family Farms, Small Businesses
WASHINGTON – Sen. Chuck Grassley, chairman of the Committee on Finance, today saidproviding tax relief and fairness for family farmers and small business owners is a key ingredient inany recipe for an economic stimulus.
“Wall Street gauges the economic slowdown by stock prices,” Grassley said. “Main Streetuses the number of farmers buying equipment at the local dealer or taking out loans at thecommunity bank. Both yardsticks are important, but only one leads to farm auctions and emptystorefronts. To get the economy back on track, we have to visit both Wall Street and Main Street.”Grassley said the nation bears a record tax burden, with family farmers and small businessowners paying a significant part. They file their taxes as individuals and can pay a higher rate -- 39.6percent -- than corporations at 35 percent, he said.
Grassley said President Bush’s plan to cut marginal individual income tax rates wouldgreatly help farmers and small businesses. If the President’s plan were in effect, farmers and smallbusinesses would pay a lower marginal rate than the Fortune 500 companies, Grassley said.Grassley’s comments came after a hearing at which experts testified about the economicvalue of family farms and small businesses and the financial hardships they face. John “Skip”Bright, a community banker in Keokuk, Iowa, explained that community banks are struggling tosecure deposits. People are investing their money on Wall Street instead of depositing it in localbanks; this means community banks have less money to fund local farm and business growth, Brightsaid.
Bright called for initiatives that would help to keep lendable funds in local communities. Hesaid he supported Grassley’s pending legislation to:
< Create Farm, Fishing and Ranch Risk Management (FFARRM) accounts. These farmersavings accounts would allow farmers to contribute up to 20 percent of their income in anaccount and deduct it in the same year. FFARRM accounts would be a very important riskmanagement tool to help farmers put away money when there’s actual income, so that in thereally bad times there would be a safety net. This enjoys strong bipartisan support and wasapproved in 1999 as part of the Taxpayer Relief Act, which President Clinton vetoed.Bright said these accounts would “provide a badly needed source of funding for all types oflending.” President Bush’s budget blueprint includes farmer savings accounts, although exact detailsaren’t available.
< Strengthen “aggie bonds.” This expands opportunities for beginning farmers who need lowinterestrate loans for capital purchases of farmland and equipment. Current law permits stateauthorities to issue tax-exempt bonds and to lend the proceeds from the sale of the bonds tobeginning farmers and ranchers to finance the cost of acquiring land, buildings andequipment used in a farm or ranch operation.
Unfortunately, aggie bonds are subjected to a volume cap and must compete with bigindustrial projects for bond allocation. Grassley said aggie bonds share few similarities withindustrial revenue bonds and should not be subjected to the same volume cap. Bright agreed,saying “this would encourage states to start aggie bond programs and provide morebeginning farmers with low-cost capital.”
Grassley’s FFARRM accounts and aggie bonds proposals are part of his broad package oftax relief measures for family farms and fisheries. That legislation, introduced last month, is the TaxEmpowerment and Relief for Farmers and Fishermen Act (TERFF), S. 312. The measure alsoreverses unfair IRS decisions on self-employment tax for farmers; provides a tax deduction forfarmers and restaurants to donate to food banks; and offers income averaging for farmers who arecaught in the Alternative Minimum Tax.
“Our nation’s safe and abundant food supply depends on family farmers,” Grassley said.“Most new jobs come from small businesses. It’s important for Congress to ease their tax burden.High taxes are the weeds that choke farm and small business growth.”
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