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Do Most U.S. Farms Really Lose Money? Taxation and Farm Income Underreporting

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  • Key, Nigel D.

Abstract

This article explores whether income underreporting for tax purposes can explain why the majority of U.S. farmers earn low or negative net farm income. Using 10 years of U.S. Department of Agriculture farm-level data, the extent of underreporting is estimated by exploiting the fact that farm households face an incentive to underreport farm income that varies with their reported off-farm income. Results indicate that 39% of total farm income is underreported. For large farms, the results imply a substantial discrepancy between reported and earned farm income. For small-scale operations, underreporting reduces but does not eliminate the gap between farm and off-farm wages.
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Suggested Citation

  • Key, Nigel D., 2018. "Do Most U.S. Farms Really Lose Money? Taxation and Farm Income Underreporting," 2018 Annual Meeting, August 5-7, Washington, D.C. 273807, Agricultural and Applied Economics Association.
    • Handle: RePEc:ags:aaea18:273807
    DOI: 10.22004/ag.econ.273807
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    Keywords

    Ag Finance and Farm Management; Household and Labor Economics; Food and Agricultural Policy Analysis;
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