There's a new Congress coming to town next year, but it looks a lot like the group that'll go back to work next week. What does that mean for agriculture? That's a tough question, but American Farm Bureau Federation President Bob Stallman talked about the key issues his organization sees as those lame duck lawmakers return to Washington, D.C., next week.
Stallman acknowledged that he's been asked what he thinks about the outcome of the elections and his response is that after spending promotion money and a month of intense campaigning one thing is true: "The more things change the more they stay the same." Essentially the House and Senate have the same political make-up - with the Democrats picking up two seats in the Senate and as many as six in the House. The party balance has note changed.
But in this lame duck session, Stallman notes there are some significant issues beyond the farm bill that are of concern. "In the fiscal cliff discussion there are three tax issues that will be discussed in that negotiation that really impacts the farm and the outcome of those discussions may be more important than getting a farm bill."
Here are those three key issues:
The Estate tax, which currently provide a $5 million exemption and a top tax rate of 35%, but it ends Jan. 1 and the exemption drops to $1 million with a top tax rate of 55%. "This will amount to the confiscating of a number of farms. It is projected that the new level of estate taxes, if put in place, would impact 10% of farms and ranches. It is pretty devastating," Stallman says.
Capital gains rates could go up. "Farming is a capital intensive business and if the rate goes up that could be detrimental agriculture," he notes.
Depreciation deductions go away. The Section 179 depreciation provision drops from $139,000 to $25,000 plus an adjustment for inflation in 2013. And the 50% bonus depreciation will also go away. "This accelerated depreciation provision has tempered the cost of upgrading in agriculture," he notes.
Add in that a newly created recession that could occur if Congress doesn't avoid that fiscal cliff, and he adds this is also not good for agriculture. "Prices farmers receive are influenced by the state of the economy and the demand for our products," he notes.
Moving on the farm bill
While the fiscal cliff is a hot-button issue, there's still a five-year farm bill out there awaiting passage. The Senate passed its version of the measure in June, and the House version has been languishing - after passage by the House Agriculture Committee - since August. Stallman notes that figuring out where Congress will go in the lame duck session would fill "binders with scenarios" his association wants to see a five-year bill reauthorized.
"We need to know the rules. We're making plans for the next crop year," he says. "Our preference is for a full five-year bill and a lot of the work has already been done."