Governor’s proposal would tax away our state’s farms
Gov. Jim Justice has proposed a plan to cut 60 percent of West Virginia’s personal income tax, which is roughly $1 billion in revenue, and he hopes eventually to get rid of the rest of the income tax. We at the West Virginia Farm Bureau appreciate his effort, but for farmers, the current plan causes great concern.
The governor has suggested counteracting a portion of the income tax cut with higher taxes on a variety of goods and services, including advertising, professional services, and tobacco products.
Unfortunately, his plan also would impose costs on family farmers. Unlike many businesses, farms operate as commodity-based businesses, so they can’t pass extra tax costs on to consumers of their products. Data from the American Farm Bureau Federation show that farmers receive only 9.8 cents of every dollar that American consumers spend on food and agricultural products.
Running a farm or ranch is challenging under the best of circumstances because agricultural businesses operate in a world of unpredictable markets, weather disasters, fluctuating input costs — and under Gov. Justice’s plan, a significant tax increase. On top of that, many federal policymakers are expecting agriculture to absorb more costs in the effort to address climate issues and promote environmental sustainability. We can’t control what happens in Washington, D.C., but we must take actions there into account.
For West Virginia farmers to maintain their long tradition of producing high-quality, nutritious food for West Virginia consumers, they first must stay in business. Recent data from the American Farm Bureau Federation show almost 50 percent of all farmland in America is at risk of increased liquidation pressure caused by overwhelming tax burdens. As a result, it is difficult for farmers to pass on their family businesses to the next generation.
As they consider tax reform, we ask the governor and legislators to consider the definition of personal income under the categories of: Schedule C Business Profits; Schedule E Rents, Royalties and Pass-through Entity Profits; Schedule D Capital Gains; and Schedule F Farm Income. Many family farms are pass-through entities and, as such, for any tax reform that would help farming, those revenues must experience a reduced rate of tax similar to that from regular employee income.
West Virginia’s agricultural economy can grow but we need meaningful legislation that would reduce a farmer’s tax burden, not increase it. We welcome the opportunity to explore how to do that. But increasing consumption taxes with no offset for farm income won’t do it.
Less than 2 percent of our population is directly engaged in growing agricultural products that feed, clothe and, in many cases, provide power to our state, our country and our world. Farm bankruptcies are at the third-highest level they have been at in a decade.
The Tax Cuts and Jobs Act of 2017 helped farmers start building stability and sustainability for farm operations. However, many of the act’s provisions are temporary. The current version of the governor’s proposal would be an additional setback for West Virginia farms.
We understand the tax reform plan has a long way to go to become law. We want to be at the negotiating table to make sure it is a good product that would protect agriculture and help West Virginia grow.
A decision to place additional tax burdens on West Virginia farms would make our farms less competitive and could discourage the next generation from getting into the business of production agriculture. We ask Gov. Justice and legislators not to tax away our farms. Let’s keep our farms working and helping to move West Virginia forward. We stand ready to help in any way possible to craft an appropriate reform package.
(Wilfong is president of the West Virginia Farm Bureau.)