AEI scholars note that subsidizing crop insurance encourages farmers "to expand crop production on highly erodible land. Subsidies may induce excessive use of fertilizers and pesticides. Producers on marginal lands that have poorer soils and climates tend to use more fertilizers and pesticides, which can cause water contamination problems.
Sugar cane production has expanded in Florida because of the federal sugar program, for example, and the phosphorous in fertilizers used by the growers causes damage to the Everglades. Finally, subsidies may discourage crop rotation in favor of planting only a subsidized crop, which in turn can lead to increased use of fertilizers. The boom in corn production driven by subsidies and the ethanol mandate is apparently generating pollution problems in the Mississippi River and Gulf of Mexico.
Subsidies Are in Addition to Favorable Taxation. If farmers were large payers of federal income tax, they might argue that they were covering the costs of the spending subsidies they are receiving. But that is often not the case. Income tax data over recent decades show that, in general, farm businesses are lightly taxed.
About 87 percent of farms are structured as sole proprietorships and file under the individual income tax with a Schedule F. Farms structured as partnerships and S corporations also pass through their business income to their individual returns. A small share of farms are structured as C corporations and pay the corporate income tax. Overall, farm entities taxed under the individual income tax account for 97 percent of farms and 85 percent of agricultural production.
The USDA examined farm taxation in and found that "in general, income from farming is taxed more favorably than income from many other businesses. Since , aggregate farm losses have exceeded farm profits and are used to offset taxes on off-farm income. More recent USDA studies show that farm tax returns continue to show net losses overall.
Losses on tax returns do not necessarily mean that farms are losing money, but rather that tax rules for farms are very favorable. Internal Revenue Service IRS data show that aggregate farm losses reported on Schedule Fs are often roughly twice the size of aggregate farm income. Larger farms may have substantial capital gains and rental income from the farm, which can move their farm-related income into positive territory.
But even including that income, about half of farms report an overall loss from farm activities on their tax returns. IRS data for show 1. The USDA reports that "about half of all farm partnerships and small business corporations also report losses" on their tax returns in a typical year.
Larger farms are more likely to pay income taxes than smaller farms. Why is that? In testimony to the House Committee on Agriculture last year, accountant Christopher Hesse, who specializes in farm taxation, described more than a dozen tax provisions that provide favorable treatment to farms. The Tax Cuts and Jobs Act provided a new tax benefit for farmers who sell their crops to cooperatives. The Wall Street Journal said it would allow "more farmers to lower their taxable income to zero and cost the U.
In sum, farmers have done well for themselves in Washington, not just on the spending side of the federal budget but also on the tax side. It is true, however, that the largest farms that receive the bulk of subsidies are also more likely to be payers of income tax.
The Trump administration's budget proposes cuts to farm subsidies, but it also promises to "maintain a strong safety-net for farmers. Farmers deal with fluctuations in crop prices and yields, which causes variations in their incomes. But those risks are well known, and farmers can plan for them.
For one thing, they can save. When corn prices are high, the corn farmer can save the excess profits, and when corn prices fall he or she can withdraw from savings. Borrowing is another way to smooth finances over time. In good times, farmers can pay down debt so that they have more room to borrow during leaner times. Farm program supporters claim that farmers would not be able to access bank credit without the federal aid they currently receive.
But Vincent Smith notes that banks routinely lend to unsubsidized farm businesses. Banks "are happy to make loans to ranchers who raise cattle not crops and hog and poultry producers, without a guaranteed government backstop. All those businesses manage farm operations with highly volatile incomes and costs.
Saving and borrowing are basic financial tools available to all businesses. There are other market-based tools that farmers can use, including insurance and various price hedging products such as futures and options.
The existence of farm subsidy programs has replaced, or crowded out, greater use of such market-based financial tools. Diversification is another strategy farmers can use to reduce risks. They can diversify their crop plantings to reduce risks from fluctuating yields and prices.
They can diversify their planting locations to reduce risks from adverse weather. Farm households can diversify their sources of income to include both farm and off-farm income. Indeed, USDA data show that about three-quarters of farm household income today comes from off-farm sources. Farm households have greater financial stability today than in the past. Farm debt levels have been low in recent decades. With the exception of the mids, the annual rate has been 2 to 3 per 10, farms since the s, and it was 2.
Farmers Would Thrive Without Subsidies. Different crops might be planted, land use might change, and some farm businesses might contract while others expanded. Farm businesses would rely on market-based risk-reduction methods, such as saving and diversification. A stronger and more innovative industry would emerge that had greater resilience to market fluctuations. An interesting example of farmers prospering without subsidies is New Zealand.
In that nation ended its farm subsidies, which was a bold stroke because New Zealand is four times more dependent on farming than is the United States. FSA is also providing additional flexibilities for producers to file on acres with failed crops or crops that were prevented from planting because of extreme weather events.
For insured crops, producers who timely filed a prevented planted claim with the reinsurance company but filed a Notice of Loss CCC form after the deadline will be considered timely filed for FSA purposes. Noninsured Crop Disaster Assistance Program NAP policy holders should note that the acreage reporting date for NAP-covered crops is the earlier of the dates listed above or 15 calendar days before grazing or harvesting of the crop begins.
July 15 was a major deadline for most crops, but acreage reporting deadlines vary by county and by crop. While support for livestock is available through the Coronavirus Food Assistance Program in some circumstances, limited markets and processing may cause livestock producers to depopulate herds. NRCS offers assistance through the Environmental Quality Incentives Program to help agricultural producers properly dispose of livestock that were depopulated because of impacts from the coronavirus pandemic.
Through the Emergency Animal Mortality Management practice, NRCS helps producers plan and cover part of the cost for disposing of livestock because of an emergency animal mortality event. Once capacity is reached in an animal mortality facility, NRCS will help producers dispose of the remaining livestock through burying, incinerating, disposal at landfill or render, and other disposal options. Prior to payment, a swine mortality certification is required by a veterinarian or animal health specialist.
Payment rates for swine include:. To learn more about Emergency Animal Mortality Management for swine, download this fact sheet. Prior to payment, a livestock or poultry mortality certification is required by a veterinarian or animal health specialist. Payment rates for livestock and poultry include:. Actual costs may be significantly different from payment rates.
To learn more about Emergency Animal Mortality Management for livestock and poultry, download this fact sheet. December 1, Dec. USDA Coronavirus. Some USDA offices are beginning to reopen to limited visitors by appointment only. Learn more at farmers. If this locator does not work in your browser, please visit offices. USDA flexibilities and programs for farmers and ranchers include:. Spot Market Hog Pandemic Program. Organic and Transitional Education and Certification Program. Farm Loan Flexibilities.
FSA will follow the most current state or local guidance for use of online or virtual notary services. Suspending Debt Collection and Foreclosures USDA has temporarily suspended non-judicial foreclosures, debt offsets or wage garnishments, and referring foreclosures to the Department of Justice. Relaxing the Loan Making Process FSA is relaxing the loan making process and adding flexibilities for servicing direct and guaranteed loans to provide credit to producers in need.
This includes: For direct loan applicants, FSA provides two notifications of an incomplete application.
These notices give the applicant 30 calendar days total, to provide the additional information needed before the application is withdrawn. FSA loan officials will maintain close communication with applicants who are experiencing difficulties completing application requirements due to complications from COVID and may grant the applicant an extension. Where lien searches cannot be properly completed due to local and state government office closures, applicants may be considered eligible and processing of the loan may continue without a county records search, assuming all other eligibility and loan making criteria can be satisfied.
Preparing loan closing documents even if FSA is unable to complete lien and record searches because of closed government buildings. Once those searches are complete, FSA would close the loan.
Closing loans if the required lien position on the primary security is perfected, even for loans that require additional security and those filings and recordings cannot be obtained because of closed government buildings. Extending the repayment period of annual operating loans beyond 18 months to help borrowers survive through unique periods of financial difficulty.
At the current rate of use, it will dry up within this century. Scientists say it would take 6, years for rain to refill the aquifer. Other subsidies encourage farmers to grow corn for ethanol biofuel. The number of ethanol production facilities in the High Plains region has doubled. That drains an additional billion gallons a year from the aquifer.
Farm subsidies bills include food stamp funding. That ensures urban members of Congress will support the farm subsidy bills. Grains are the most heavily subsidized, making them cheaper than vegetables and fruits.
As a result, grains make up one-fourth of the average American diet. Oil made from corn, soybeans, and canola contributed another quarter. Most developed countries have farm subsidies. They give farmers in those countries an unfair trade advantage. The World Trade Organization limits the number of subsidized grains that countries can add to global stockpiles to reduce this edge.
But this also reduces the amount of food available in a shortage. That increases food price volatility. World Trade Organization. United States Department of Agriculture. Department of Agriculture. AG Web. Farm Sector Cash Receipts in Downsizing the Federal Government. Food and Agricultural Organization of the United Nations. The Library of Congress.
Farm Credit Administration. United States History for Kids. US Legal. National Archives Catalog. Agricultural Adjustment Administration. The U. House of Representatives. National Park Service. Featured Video. Cite this Article Format. White, Deborah. Farm Subsidies? What Are U. Presidential Election. Pros and Cons of Government Healthcare.
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