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Tax Policy and Farm Organization

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  • Tia M. McDonald
  • Katherine Lacy

Abstract

The Tax Cuts and Jobs Act (TCJA) introduced substantial changes to the tax code, affecting farms' organizational incentives. This study examines farms' responses to the TCJA along extensive and intensive margins, focusing on organizational and labor expense adjustments. Using a logit regression, we analyze the likelihood of organizational structure selection for tax purposes in response to the TCJA and the Qualified Business Income Deduction (QBID). We find farms are more likely to be organized as S corporations after the TCJA. Furthermore, using a fuzzy regression discontinuity design, we demonstrate a significant increase in wage expenses in response to QBID income limits.

Suggested Citation

  • Tia M. McDonald & Katherine Lacy, 2026. "Tax Policy and Farm Organization," Applied Economic Perspectives and Policy, John Wiley & Sons, vol. 48(3), pages 780-796, July.
    • Handle: RePEc:wly:apecpp:v:48:y:2026:i:3:p:780-796
    DOI: 10.1002/aepp.70062
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    References listed on IDEAS

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