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The Potential Impact of Tax Reform on Farm Businesses and Rural Households

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  • Williamson, James M.
  • Durst, Ron L.
  • Farrigan, Tracey L.
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    Abstract

    Several proposals calling for fundamental reform of the Federal income tax system have been put forth, including a report by the co-chairs of the National Commission on Fiscal Responsibility. The primary elements of reform—eliminating tax preferences, restructuring capital gains and dividend tax rates, lowering rates on individual income, and reducing the number of tax brackets—could have a signifi cant impact on the after-tax income and well-being of both farm businesses and rural households. This report uses published and special tabulation data obtained from the Internal Revenue Service, farm-level data from USDA’s Agricultural Resource Management Survey, and data from the American Housing Survey to examine the current tax situation for farm households and to evaluate the importance of various Federal income tax policies. For farm households, the effect of reform will primarily depend upon changes to existing treatment of investment and business income, including several important business deductions. In contrast, changes to existing individual tax credits, especially refundable tax credits, will likely be of greater signifi cance to nonfarm rural households.

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    Bibliographic Info

    Paper provided by United States Department of Agriculture, Economic Research Service in its series Economic Information Bulletin with number 145318.

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    Date of creation: Feb 2013
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    Handle: RePEc:ags:uersib:145318

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    Keywords: farm households; tax reform; income tax; tax rates; Federal tax policy; farm losses; refundable credits; tax deductions; rural households; tax preferences; Agricultural Finance; Public Economics;

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    1. Bruce D. Meyer & Dan T. Rosenbaum, 2001. "Welfare, The Earned Income Tax Credit, And The Labor Supply Of Single Mothers," The Quarterly Journal of Economics, MIT Press, vol. 116(3), pages 1063-1114, August.
    2. Thomas MaCurdy & David Green & Harry Paarsch, 1990. "Assessing Empirical Approaches for Analyzing Taxes and Labor Supply," Journal of Human Resources, University of Wisconsin Press, vol. 25(3), pages 415-490.
    3. Robert K. Triest, 1990. "The Effect of Income Taxation on Labor Supply in the United States," Journal of Human Resources, University of Wisconsin Press, vol. 25(3), pages 491-516.
    4. Mishra, Ashok K. & El-Osta, Hisham S. & Morehart, Mitchell J. & Johnson, James D. & Hopkins, Jeffrey W., 2002. "Income, Wealth, And The Economic Well-Being Of Farm Households," Agricultural Economics Reports 33967, United States Department of Agriculture, Economic Research Service.
    5. Eissa, Nada & Hoynes, Hilary Williamson, 2004. "Taxes and the labor market participation of married couples: the earned income tax credit," Journal of Public Economics, Elsevier, vol. 88(9-10), pages 1931-1958, August.
    6. repec:aei:rpaper:31222 is not listed on IDEAS
    7. repec:fth:stanho:e-90-11 is not listed on IDEAS
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    Cited by:
    1. Weber, Jeremy G. & Wall, Conor & Brown, Jason & Hertz, Tom, 2013. "Crop Prices, Agricultural Revenues, and the Local Economy of the U.S. Heartland," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 150404, Agricultural and Applied Economics Association.

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