Legislative Update: Tax Reform, Agricultural Tax Relief and More

The first session of Congress in the new millennium will actually be a carryover from the last year of the last century. It's fitting, in many ways, because many of the key issues expected to be before Congress will be holdover legislative proposals that didn't receive final action before the recess in November.

Political consensus can be tough to find in a presidential election year. However, CA believes 2000 can be a year of progress by Congress and it will be an important year to put rural issues in the national spotlight.

"An election year is an opportune time to press the political leadership of the country to focus on rural needs, and there is a broad range of issues that need to be addressed," said CA President Wayne Nelson. "As always, CA's priorities will be issues affecting the lives and economic health of rural self-employed people, small business and agriculture. High on the list are farm policy changes, affordable quality health care, tax reforms, new technology and new economic development for rural areas."

TAX REFORM

Tax reform for small business and agriculture will continue to be a CA priority in 2000.

• Health tax deduction - CA was a leader of the Health Tax Deduction Alliance last year, that pushed for accelerating the phase-in of a 100 percent tax deduction for health insurance premiums for the self-employed in 1999. However, when Congress failed to come to agreement, first on an omnibus tax reform bill and later on a minimum wage and small business tax break bill - both of which called for an immediate 100 percent health tax deduction, the opportunity was lost. A majority of members of Congress claim to support the legislation and CA will be pushing for action to match those statements in the new session set to begin Jan. 27.

• Estate tax reform - An all-out repeal of the estate tax was included in the House-passed omnibus tax bill, but neither the full repeal nor scaled-back legislation to reduce estate taxes were approved by both houses of Congress. CA will again be pushing to eliminate or reduce estate taxes because of their negative impact on the continuity of rural family-owned small businesses, farms and ranches.

• Section 179 Small-Business Expensing - legislation that would raise the business annual-expensing limit from the current $18,000 to $30,000 under section 179 rules.

• Business meal expenses - increasing the business meals deduction to 60 percent.

• Farm and Ranch Risk Management Accounts - FFARRM accounts would enable farmers, ranchers and commercial fisherman, whose economies are highly volatile from one year to the next, to set aside income in tax-deferred savings accounts in good years and take it out in low income years, when it would be taxable. The FFARRM accounts legislation has long been a priority for CA and is similar to the Income Balancing Accounts concept developed by CA in 1989.

• Taxes on farm production payments - provides that federal farm commodity production payments to farmers can be taxable in the year they are received.

• Income averaging and AMT rules - rules that would simplify income averaging for farmers and reduce the potential impact of the alternative minimum tax.

• Renewable-energy tax incentive - The tax-extenders legislation approved by Congress and signed by President Clinton included an amendment, introduced by Sen. Charles Grassley, R-Iowa, that extended the tax incentive for renewable energy. The tax incentive is crucial for the continued development of wind energy in new areas and emerging biomass crop energy development.

House and Senate hearings that will consider revisions to the 1996 Farm Bill will begin early in the new session. CA will push to advance recommendations from our Campaign for Family Agriculture to strengthen the farm safety-net, including adjustments to marketing loan rates and extending the loan period, and CA's "Price Enhancement Program" proposal. Other CA priorities include:

• Crop insurance reform - Legislation that would overhaul and enhance crop insurance by making higher coverage options more affordable, and piloting a livestock insurance program, passed the full House of Representatives. Senators Pat Roberts, R-Kansas, and Bob Kerrey, D-Neb., are chief authors of similar legislation in the Senate. Congress has earmarked $6 billion for crop insurance reform for the 2000 crop year. Senate Ag Committee Chairman Richard Lugar, R-Ill., has an alternative crop insurance reform proposal. He has said action would be taken on crop insurance by the committee no later than March 8.

• Consolidation and antitrust oversight - Legislation that called for an 18-month moratorium on mergers of large-scale agribusinesses was considered, but not approved, by the U.S. Senate. However, supporters plan to go back and write more specific legislation aimed at beefing up antitrust rules and oversight by the Justice Department, in response to deep concerns by many farmers about consolidation and a potential lack of competition in agricultural markets.

• Meatpacker competition - New CA-supported regulations that mandate full reporting of livestock sales prices will be implemented by the USDA this year, superceding similar rules adopted by several states. In addition, bipartisan legislation has been introduced that would ban meatpackers from owning livestock prior to purchase for slaughter. Senators Tim Johnson, D-S.D., Charles Grassley, R-Iowa, Bob Kerrey, D-Neb., and Craig Thomas, R-Wyo., are the original bill authors. The bill would be retroactive, requiring large porkpackers, such as Smithfield Foods, to divest their ownership of hogs over 18 months.

• Medicare rural provider relief - Rural health care providers, including hospitals, clinics and physicians, got some welcome relief from the hard hits they took from the steep cuts Congress gave Medicare in the Balanced Budget Act of 1997. Rural providers, who serve a far larger base of Medicare-age population, already were discriminated against by Medicare reimbursement policies that make lower payments to rural providers compared to urban-based providers for the same procedures. Rural consumers, too, feel the impact of Medicare under-reimbursement by cost-shifting to private commercial insurance or by health care providers leaving rural areas. CA supported a package of technical rural Medicare relief measures approved by Congress and signed by the president in November.

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