PUMPKIN PRODUCTION is making a comeback this year with quality and supply better than last year, according to pumpkin processors. ......................................2
MAJOR GUBERNATORIAL candidates answer questions and discuss state issues in the first installment of candidate viewpoints. .............................................3
INFRASTRUCTURE needs for all modes of transportation must be considered, experts agreed at a transportation summit last week. ................................................4
Monday, October 4, 2010
Two sections Volume 38, No. 40
Analyst: Tax revenues don’t justify economic costs BY MARTIN ROSS FarmWeek
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As Americans struggle with recession, a former Congressional Budget Office (CBO) director insists estate tax reform is “an important element of pro-growth tax policy” and could save millions of jobs. Under 2001 tax provisions, the federal estate tax “expired” at the end of 2009, but it will return at a $1 million pre-2002 exemption and a 55 percent tax rate unless Congress acts. That would prove “a severe blow to the economy,” Heritage Foundation senior tax policy analyst Curtis Dubay told FarmWeek. U.S. House Speaker Nancy Pelosi (D-Calif.) has pledged “America’s middle class will have a tax cut; it will be done in this Congress,” possibly as early as Nov. 2. However, it’s uncertain how the estate tax might be treated amid partisan debate over what constitutes a middle-class tax cut. Senate Ag Chairman Blanche Lincoln (D-Ark.) and Sen. Jon Kyl (R-Ariz.) seek a new $5 million estate tax exemption, with a 35 percent
tax rate. But many Democrat leaders instead support a return to 2009’s $3.5 million exemption to maintain estate tax revenues — a view Dubay calls “short-sighted.” In a 2005 CBO analysis, former CBO Director Douglas Holtz-Eakin projected the tax, which generated an annual $20 billion to $30 billion in revenues through its expiration last Dec. 31, could generate “roughly double that amount” over the next few years under reinstatement at pre-2002 levels. But in a new study for the American Family Business Foundation, Holtz-Eakin noted the U.S. “has endured a severe recession and is currently growing too slowly.” He said it is crucial policymakers focus on fostering the “maximum possible pace of economic growth.” Under current economic conditions, a 55 percent estate tax rate could cost 13.5 million U.S. jobs, he concluded. A return to original estate
tax levels also would reduce private capital outlays by 7.8 percent and greatly raise the minimum amount of return necessary to justify business investment, Holtz-Eakin stated. Slightly more than half the nation’s 120 million private sector workers work for small businesses, he pointed out. Dubay said he finds the lost revenue argument for returning to pre-2002 levels “disingenuous,” arguing economic growth would compensate for “death tax” revenues lost, especially given likely income through future capital gains taxes. Dubay noted the “step-up” in capital gains tax basis, in which inherited property rises to fair market value at the owner’s death, expired last year with the estate tax. “Step-up” was replaced by “carry-over basis,” in which the basis of property remains the same after death, potentially increasing the amount of gain and thus taxes when assets are sold.
“Estates don’t pass ‘taxfree’ when there’s no death tax,” he pointed out. “The heirs will have to pay capital gains on the entire accumulat-
ed earnings of an asset. “When you have this ‘modified’ capital gains/death tax system, the revenues are almost a wash.”
Heat, dryness drop yields in Southern Illinois BY DANIEL GRANT FarmWeek
While many Illinois farmers dealt with excess moisture this growing season — it was the sixth wettest summer on record in the state — some farmers in parts of Southern and Eastern Illinois had exactly the opposite problem. For them, Mother Nature basically turned off the water spigot after July. Topsoil moisture last week was rated 100 percent short or very short in Southeastern Illinois, 63 percent short or very short in Eastern Illinois, and 21 percent short or very short in the southwestern part of the state. “We’ve had hardly any measurable rain (since Aug. 1),” said Martin Barbre, who farms
in White County. “But what really hurt us more than the lack of moisture was the (excessive) heat. We were above 90 and 95 degrees for days and days.” Barbre reported some of his soybean crop simply died in the field. He recently harvested a bean field that averaged 16 bushels per acre. Meanwhile, much of his corn crop, which looked “excellent” in July, was unable to fill out. He recently harvested a field that averaged 110 bushels per acre. “It took anywhere from 15 to 30 bushels off the top of corn yields and probably 10 to 15 (bushels) off bean yields,” Barbre said. Jim Baker, who raises freerange poultry in Franklin
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County, said the hot, dry conditions were particularly difficult for livestock producers and their animals. Baker in recent months had to increase feed and water rations to maintain his flock. “It’s not a good situation,” he said. “I know a number of cattlemen who are concerned about where they’re going to get hay.” Overall, large portions of the southern and eastern Corn Belt are dealing with extreme dryness or drought while the northern portion of the Corn Belt in recent weeks experienced more flooding. USDA last week reduced the portion of the corn crop rated good to excellent by 2 points to a total of 66 percent. Twenty-one percent of the crop was
rated fair nationwide while the portion rated poor or very poor increased 2 points to 13 percent. Harvest last week continued at a rapid pace. As of the first of last week it was 57 percent complete on corn, compared to just 2 percent last year, and 22 percent of the soybeans were in the bin, compared to 1 percent a year ago. “If we keep this up, it will be my earliest harvest ever,” said Barbre, who projected harvest will be complete in his area by the middle of this month. Sorghum harvest in the state as of the first of last week was 32 percent complete compared to 1 percent last year while 8 percent of the winter wheat crop was seeded compared to 4 percent a year ago.
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