1985 was a great year to be a Kansas City Royals fan, but if you are a student of tax policy, you will know 1986 was truly the record year. In late October 1986, baseball fans watched in anticipation as the New York Mets claimed their first World Series title in franchise history. That same week, President Reagan signed major tax reform legislation into law that would guide America’s tax policy for more than 30 years.
A lot has happened in the past 31 years. Not only have there been changes in baseball, but President Trump and Congress have been tossing around the idea of major tax reform since well before last year’s election. On Thursday, Republicans in the House of Representatives released their game plan for tax reform, also known as the Tax Cuts and Jobs Act. This long-anticipated piece of legislation serves as Congress’s first pitch toward reforming our federal tax code. Now that the bill has been introduced, it faces a tough battle in the House and Senate. Congressional Republicans have vowed to have the bill signed by the President by the end of this year.
Farmers and ranchers know the key to successful tax reform is lowering their overall effective tax rate. Agriculture leaders from all over the industry have made it clear to Congress that agriculture’s unique business circumstances must be represented and addressed fairly with any new tax system.
Fortunately, the tax reform package introduced in the House maintains some key provisions that are crucial to the success of farmers and ranchers, including maintaining cash accounting, continuing the business interest deduction, and increasing the Section 179 immediate expensing threshold. In addition, the proposal increases the exemption for the federal estate tax for the next few years until it is eventually eliminated.
With any type of legislation, a true grand slam is rare. While many proposed changes to the tax code seem positive for farmers and ranchers, there are several issues that need to be addressed, such as like-kind exchanges and deductions for state and local taxes, among others. In the coming weeks the bill will likely undergo changes, substitutions may be made, and some of the original provisions may even get tossed from the game. Just like baseball, legislation can be unpredictable.
Attaining effective tax reform for Missouri’s farmers and ranchers is no easy task, but the Tax Cuts and Jobs Act is certainly an encouraging step in the right direction. Last week, the Houston Astros made history as they claimed their first World Series title in franchise history. Now, it is time for historical tax reform that makes positive changes for Missouri’s farmers and ranchers.