U.S. AGRICULTURE BENEFITS FROM BUSH ADMINISTRATION TAX RELIEF AND ECONOMIC STIMULUS POLICIES Media Contact:

NEWS UNITED STATES DEPARTMENT OF AGRICULTURE Office of Communications News Room 460-A Washington, DC 20250-1300 Internet: News@usda.gov Phone: 202-720-9035 World Wide Web Home Page: http://www.usda.gov Release No. 0151.02 U.S. AGRICULTURE BENEFITS FROM BUSH ADMINISTRATION TAX RELIEF AND ECONOMIC STIMULUS POLICIES Farmers and Ranchers will Save $20 Billion Over the Next Decade WASHINGTON April 15, 2002---Farmers and ranchers will benefit from many new tax provisions and economic stimulus initiatives enacted by President Bush during his first 15 months in office, Agriculture Secretary Ann M. Veneman said today. "For farmers and ranchers, the President's strong leadership helps farm income on two fronts," Veneman said. "By spurring the U.S. economy and bolstering consumer confidence and household income, the demand for farm products will increase. At the same time, tax reductions directly reduce the amount farmers and ranchers will owe the government, giving them more expendable income to invest in other areas." Veneman outlined how the Economic Growth and Tax Relief Reconciliation Act of 2001, signed by President Bush last June will help farmers and ranchers. The Act reduces federal income taxes by lowering marginal income tax rates, expands the child tax credit, addresses the marriage penalty, increases education incentives and allows higher contributions and great flexibility for individual retirement accounts and pensions. Farmers and ranchers pay approximately $26 billion annually in federal income taxes. "About 85 percent of U.S. farmers and ranchers will benefit from the many changes in the tax laws," Veneman said. "We estimate that farmers and ranchers saved $1.2 billion on their 2001 income taxes. And, over the next 10 years, farmers and ranchers will save nearly $20 billion in federal income taxes." Another important part of the Act is the phase down and out of death taxes. "The tax relief act greatly reduced the number of farm estates affected by the death tax and the amount of taxes paid by farm estates," Veneman said. "This will make it easier to transfer farm property from one generation to the next and help keep family farms in the family." The death tax reduces estate tax rates and increases the dollar amount of property exempted from tax from the current $675,000 to $3.5 million by 2010. "Prior to the Act, about one in every six farm estates were required to file an estate tax return," Veneman said. "We now expect about one in 10 farm estates will be required to file a return in 2002, declining to only one in 25 in 2006. Over the next decade, farmers and ranchers are expected to save about $3 billion in federal estate taxes." Other benefits of the new tax law include the creation of a new 10 percent income tax bracket for the first $12,000 of taxable income on a joint account and reduction of the marginal income tax rates for other income tax brackets. The new tax bracket was the basis for the special refund checks last year. Nearly two thirds of farmers and ranchers received the maximum refund for a joint return of $600. The tax refund pumped $40 billion into the U.S. economy during the economic slowdown. A provision in the Job Creation and Worker Assistance Act of 2002, signed in March by President Bush, also helps the agriculture community. It allows for additional expensing in the first year when buying capital equipment. Farmers already have a first year capital depreciation deduction. The new provision allows a producer to take that deduction in the first year, then take 30 percent of the remaining cost basis as another first year deduction, and then apply the regular depreciation schedule to the remainder of the cost. For example, a farmer making a $100,000 investment in new equipment would get about $20,000 in added first year expensing. Assuming the farmer is the in the 15 percent federal marginal income tax bracket, the federal income and self employment tax savings would be around $5,400. "These changes are important to U.S. agriculture," Veneman said. "President Bush is asking Congress to make these tax changes permanent for farmers, ranchers and all Americans." #