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Federal taxes, such as the individual income tax, the estate and gift tax, and social security and
self-employment taxes, influence farmland prices, capital purchases, structure, and farm profitability. Research on Federal tax provisions of importance to farmers and other rural residents estimates the financial burdens imposed by these taxes as well as behavioral adjustments made in response to tax policy.
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Effects of Federal Tax Policy on Agriculture
This report analyzes the effects of the current Federal tax code on farming. It is the first study that applies the ERS farm typology to tax data. The study was initiated by the USDA National Commission on Small Farms and also evaluates tax proposals to assist beginning farmers. Investment, management, and production decisions in agriculture continue to be influenced by Federal tax laws, although this influence may be less than in earlier decades.
Fundamental Tax Reform and Farmers
Replacing the existing Federal income tax with either a flat tax on income or a Federal retail sales tax would dramatically shift Federal tax policy. Following a transition period, farmers would likely experience a reduction in compliance costs due to reduced complexity. However, the indirect effects on interest rates, asset values, and incentives to invest in farming are likely to be of greater importance than the level of Federal tax payments for many farmers.
web administration: webadmin@ers.usda.gov
updated: May 21, 2001
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