Farmers: Tax Reform Plan Would Target Agriculture

Eliminating sales tax exemptions on machinery, seed, fertilizers and chemicals would be a net liability for Nebraska farmers.

Published on: Feb 14, 2013

Gov. Dave Heineman's proposed tax reform package, is now in the Legislature's Revenue Committee. He proposes to drop state corporate and income taxes and, to offset those revenues, by eliminating sales tax exemptions.

The sales tax exemption for ag machinery and crop inputs, including seed, chemicals and fertilizer, would be eliminated.

Nebraska ag interests have come out strongly opposed to the measure.

The impact on Jason Kvols, who farms 700 acres of corn and soybeans near Laurel, would be an increase of $17,000 in annual taxes, based on the inputs he purchased in 2012. "Raising a young family on 700 acres, most of it dryland acres, is tough enough, but adding that amount to my tax bill is unacceptable," he says. "That's a burden we can't afford."

Farmers: Tax Reform Plan Would Target Agriculture
Farmers: Tax Reform Plan Would Target Agriculture

Kvols says his tax liability would arise from imposition of sales tax on machinery and the inputs of chemicals, seed and fertilizer.

"The governor's tax reform sounds good at first blush, but it's the details that concern farmers," he adds. "It appears this tax reform proposal heavily targets the agriculture sector to make up the difference when income taxes are eliminated."

Myles Ramsey of Kenesaw says he would face an additional $28,000 tax bill after his income tax bill is eliminated but the sales tax is assessed on his farm inputs. Looking back on the inputs purchased in 2012, Ramsey says he would owe $40,200 in sales tax on expenses. Minus the $12,000 he would save from not having the income tax, Ramsey would have a net tax obligation of $28,000 in taxes.

Steve Nelson, Nebraska Farm Bureau president, says, "Placing new taxes on agriculture inputs and machinery will make it even more difficult for young people working to establish their own farms and ranches."

Many of those younger farmers rely on machinery and equipment purchases to get started in farming or ranching, Nelson says. They don't own the land they farm. They farm or ranch through rental agreements.

Kvols wonders why the governor, who has always supported agriculture in the past, is proposing a tax overhaul that would hurt agriculture significantly. "If he wants to keep agriculture strong, why is this plan so heavy handed against agriculture?"