These days, we hear more and more about “The Top Two Percent”, those Americans, according to the President, who need to be paying more in taxes to help balance our budget. American farmers, who happen to also be two percent of the population, are caught in the crossfire of this claim. Now, I could go on and on about how Obama’s second term is going to hurt small business; but I’m going to focus on the main point: taxes. You see, family farms like mine are also small businesses, and, due to our wonderful tax system, are taxed as such. Let me explain...
Most family farms, like mine, are incorporated into what’s called a LLC (Limited Liability Corporation). Now, an LLC is a great way to operate; it gives you some liability protection from lawsuits, and if your business does fail, it can help keep you from loosing everything you’ve ever made. But there is a bad part of LLC’s: the taxes.
Now, LLC owners, like most Americans, file a 1040 with income and expenses. So let’s just use some simple examples. Right now, President Obama wants to raise the tax rates on the “top 2 percent”--those who earn over 250,000 a year--substantially. That will cost family farms millions, and hurt folks like me who are trying to earn an honest living, and provide jobs to others. See, when I file taxes, I have to attach what’s called a “schedule F” to my 1040; it shows how much farm income is passed on to me. Let’s say my farm “makes” 200,000 dollars in profit. Now, anyone who owns a business can tell you, you never, NEVER, actually “make” that. That’s what you show on paper; in reality, you may not have paid yourself anything, or maybe only a few thousand dollars; you’re constantly reinvesting in your business. But that doesn’t matter; according to the IRS, you made 200,000 dollars. Now, if your spouse works in town, as mine does, and has a good job, you can eclipse 250,000 pretty fast.
This rhetoric about “top earners paying their fair share” is a killer. I can tell you right now, we are sitting on capital, as many small business owners are, because we are unsure about what the future holds in terms of taxes, regulations, ect. Regulations like Dodd-Frank have made it harder and harder for the small town banks to lend us money to operate, forcing us to keep more cash on hand. Instead of spending hundreds of thousands of dollars with local contractors build more grain and fruit storage, we’ll sit on our hands and see what the future holds.
This isn’t just in farming, folks. This is happening everywhere.
Elections have consequences, and we have to live with the will of the majority. Unfortunately, I believe far, far too many in that majority have never signed the front of a paycheck, balanced the books, and paid the taxes. But, if you understand what I’m saying, and if you agree that we need to keep small businesses hiring and growing, please, take the time to talk with your congressperson about this issue.
Jeff VanderWerff is a 4th generation farmer from Sparta, Michigan. When not ranting about politics, he raises corn, wheat, soybeans, apples, and peaches. You can find him on YouTube at www.youtube.com/agsalesman