During the current 113th Congress, several lawmakers have proposed reforms that broaden the tax base and lower tax rates by removing a combination of incentives or provisions currently used by individuals, businesses and organizations. On many occasions, legislators have indicated that no incentive or provision is safe.
On the surface, this sounds like a good idea, one that could fairly achieve the results needed to simplify the overly complicated tax code in a fairer manner.
However, one must be careful to balance short-term savings against the longer-term economic impact of investments that likely will not occur without those incentives. In the small business sector, a tax provision called Section 179, or Small Business Expensing, provides a tax deduction for qualifying business expenses up to a certain level or cap.
In the agricultural sector, family farmers have used this provision as an incentive to purchase tractors, combines and grain bins, and to build new barns. Thus, this expensing provision has encouraged manufacturing employment, local investment and business expansion in an increasingly competitive business sector. Most of these dollars spent on goods and services remain in the local economy, further stimulating growth and job creation in rural areas that are faced with many economic challenges.
Other tax provisions have allowed farmers to invest in new technologies, increase efficiencies and improve farm sustainability. Such developments help farmers adopt the most innovative management practices and foster productivity in an ever-changing and stricter regulatory environment. These tax provisions contribute to the enhancement and protection of our shared natural resources, such as clean water and air.
It’s clear that our tax code needs to be simplified – taxpayers deserve something more stable and predictable. But deep reform must carefully consider the economic impacts that each provision provides, including the stimulation of further economic activity and job growth at the local level. We must also be careful to consider that our country is just now recovering, albeit at a glacial pace, from one of the worst economic recessions ever. We must avoid policy that may result in further business closures or other similar unintended consequences.
Energy costs are one of agriculture’s biggest expenses today. Unfortunately expanding regulations and the threat of removing incentives for domestic exploration (Section 199 credits) make fuels and electricity more expensive than they need be. Domestic energy companies must be encouraged to explore every conceivable source of energy, including gas and oil. It was only last winter that LP, or liquid propane gas, was at a critical shortage level in Indiana, not because of lack of drilling but through bad federal policy and lack of approval of a new modern pipeline system. Not only was the well-being of livestock in jeopardy but also that of rural Indiana citizens who rely on propane as their main heating source. The call of EPA regulators to eliminate the coal industry will have a dramatic effect on electricity costs in the Hoosier state and ultimately the cost of your food.
Over the course of the next Congress there will be many discussions and attempts at broad based tax and regulatory reform. We need to ask ourselves which of these reforms will stimulate and grow the economy and put the most Hoosiers back to work. We must all consider these economic realities and prioritize these items when making our voices heard in Congress.