When President George W. Bush entered his second term in 2005, he famously said he had earned political capital that he intended to spend. He launched his term with tax reform high on his agenda, but as his approval ratings sank, so did his chances of enacting broad tax reform. Eight years later, the U.S. Congress is positioning itself to achieve broad tax reform.
Last month, the House and Senate fiscal committees, each led by a different political party, launched www.taxreform.gov, marking an atypical yet welcome bipartisan move. This is a refreshing step toward addressing a controversial topic.
When they launched taxreform.gov, House Ways and Means Committee Chairman Dave Camp, R-Mich., and Senate Finance Committee Chairman Max Baucus, D-Mont., announced their intentions of coming up with broad tax reform together. Since then, they have stated that they hope to complete bills in either chamber by the end of the year, which, in Washington-speak, could mean as early as this summer.
After numerous listening sessions and hearings, Ways and Means Chairman Camp released a discussion draft of proposals to change the way small businesses are taxed. Included in the discussion draft were provisions to reduce the size of incorporated farms and small businesses eligible to use cash accounting—from $25 million of gross receipts to $10 million of gross receipts—and to lock in lower Section 179 small business expensing amounts, reduced from $500,000 to $250,000.These are major items of concern.
Farm Bureau supports the continuation of unrestricted cash accounting for farmers and ranchers who pay taxes as individuals. We caution against reducing the number of incorporated farms eligible to use it. Additionally, we support maintaining the $500,000 small business expensing limitation and not reducing the $2 million acquisition limit.
Another message we continue to share is that Farm Bureau opposes the estate tax. More and more farms are in danger of topping the exemption in current law, and estate tax planning remains complex and expensive for those close to or over the threshold. Until permanent repeal is achieved, the exemption and gift tax exemption should be increased and the Special Use Valuation, which provides a valuable estate tax planning tool for farmers and ranchers who live in high land value areas, should be expanded.
We anticipate more tax reform ideas will be released in the coming weeks and months. We will continue to monitor new developments in Washington, and ask you to contribute your ideas directly to taxreform.gov. Our advocacy at Farm Bureau can improve when we hear your ideas as well. Feel free to contact me any time to share your thoughts on reform to the U.S. tax code.