By Greg Jergeson
Eventually, one must reach the conclusion that you can't
use Chap Stick to treat a gaping chest wound. This was the
conclusion I came to as the Senate Agriculture committee
considered SB 245, the Farm Risk Management Savings account
proposal. SB 245 would allow farmers and ranchers to
establish tax-free savings accounts during the good years
that they could then use during the lean years. On the
surface, this sounds like a fairly reasonable idea. However,
surface appearances don't always tell the whole story.
It is necessary to examine whom this bill would really
help. The young farm family with large land payments and
accumulated operating debt from years of low commodity
prices wouldn't be able to make use of this bill. Their
financial institution would instruct them to pay down their
loans first, rather than putting money away in a savings
account.
As originally introduced, these savings accounts would only
be available to individuals, not to corporations of any
kind. Realizing that many family agricultural operations are
organized as corporations, the Senate committee amended the
bill to include corporations where all stockholders are
immediate family members. Again, that may appear reasonable
until one understands who immediate family members are.
Obviously, this would exclude corporations where the
stockholders are cousins or other distant relatives. Are
adult siblings considered immediate family members? Would a
parent-child corporation be OK but a corporation involving
two brothers not be? These are details that must be worked
out before the bill is passed but the committee chairman was
anxious to pass the bill without those questions being
answered.
Many young farm families have found it necessary for one
spouse or the other to get an off-farm job in order to
survive. SB 245 would not permit a family where a majority
of the earned income comes from such an off-farm job to
establish one of these tax-free savings accounts. On the
other hand, there are no limits on the amount of unearned
income a person could have to qualify for this program. One
could have any amount of income from interest, dividends,
movie residuals and other unearned income and still qualify
to establish one of these
tax-free savings accounts.
At best, this bill is of doubtful value to those who really
need it in rural communities and may provide benefits to
those who need it the least. Clearly, this session faces
some very difficult decisions in order to achieve a
constitutionally mandated balanced budget. In a session when
we can't properly fund the Agricultural Experiment Station,
the Cooperative Extension Service, or the Agricultural
Heritage program, should we be passing a tax break that only
benefits a small group of the well healed? In a session when
we can't properly fund K-12 education from the state level,
thereby increasing local property taxes, should we pass a
tax bill that does nothing for young farm families?
Though the fiscal note on Senate Bill 245 doesn't yet
reflect it, the cost of this proposal could be significant.
I believe thi
