Farmers flush with cash from high-priced crops and taxpayer subsidies would get a $40,000 income tax shelter under a proposal by Rep. George Nethercutt, R-Spokane.
Nethercutt Wednesday proposed a “rainy day” Individual Retirement Account for farmers to encourage them to save for times when crop prices drop and taxpayers stop paying subsidies.
There’s no guarantee the bill will go anywhere in Congress, but Nethercutt said it was important to give farmers “the opportunity to plan for times when it’s going to be rough.”
For most farmers, that won’t be 1996. Congress has enacted a seven-year plan that will pays flat, declining payments of up to $40,000 per farmer regardless of the price of their crops. With grain selling for the highest price in 20 years, most Inland Northwest wheat farmers expect to earn a profit.
Under Nethercutt’s proposed Agriculture Market Transition Reserve Act, farmers could shelter this year’s $40,000 payment - and its tax liability - for future, unprofitable years when their tax bill was lower. The funds are good for at least 10 years.
The fund would defer $15,840 in taxes for an individual at the highest tax bracket; $15,200 for a farm corporation.
By contrast, people who shelter money in a regular IRA can contribute only $2,000 annually and are prohibited from cashing in the account without penalty until they turn 59.5 years old.
The farmer IRA will not cost taxpayers any money, Nethercutt said, though the U.S. Department of Treasury has yet to run calculations to verify the claim.
Nethercutt, who faces political opposition this year from Judy Olson, a Garfield, Wash., wheat farmer and Democrat and Sue Kaun, a Valley Democrat, said the tax shelter was a fair way to soften farmers’ tax bill.
“In order to maintain a good food supply and be fair to farmers, we’re offering this additional assistance,” he said. “This will benefit us all.”