Rural communities face a looming crisis if Congress allows certain provisions of the 2017 Tax Cuts and Jobs Act to expire at the end of this year or soon after. These provisions are critical to ensuring that the positive economic impacts of that landmark legislation continue to be felt by rural families, businesses, and entrepreneurs.
The TCJA was one of the biggest, most popular, and most effective pieces of legislation passed during the first Trump administration. For rural families and small businesses, particularly family-owned farms, the tax cuts enacted by the TCJA provided much-needed relief by doubling the “death tax” exemption and tying it to annual inflation rates. This is just one of the many provisions set to expire at the end of the year if lawmakers don’t act. If that happens, it could force rural families to sell their farms or businesses and pay up to a 40% tax bill to boot.
Farmers and other rural businesses benefited from a range of other provisions in the law. These included lower marginal tax rates, the child tax credit expansion, and provisions that enabled farmers and rural businesses to immediately expense research and development and equipment. Being able to expense these investments helps rural businesses that use heavy machinery continue to upgrade their equipment and improve workplace safety.
According to an Agriculture Department study, when these TCJA provisions expire at the end of the year, farming households will see their tax liabilities soar, with “moderate-sales farm households” experiencing the biggest increase in tax liability percentage-wise as marginal income tax rates increase. Call it what you want, but this amounts to a tax hike that rural families and businesses simply cannot afford.
Lawmakers in Congress have thankfully chosen to fight to preserve these vital tax provisions. House Republicans recently made an initial step in extending these lifelines to farmers by passing their new budget reconciliation plan. Allowing businesses to invest their money in their employees, operations, and growth rather than larger tax inlays to the government for spending is something we should all get behind.
CLICK HERE TO READ MORE FROM RESTORING AMERICA
However, Congress must also avoid the temptation to increase the corporate tax rate of 21%, which the TJCA lowered from 35%, to help “pay for” these tax cuts and key provisions. Any increase in the corporate tax rate is a threat to Main Street and small businesses in rural America. That matters because small businesses are the beating heart of the economy. These same small businesses benefited immensely from the TCJA, with many of them choosing to restructure as C-corporations because of the incentives created by the legislation. Raising the corporate tax rate would put these businesses in jeopardy, especially as so many are already struggling to survive the high inflation brought on by the last administration’s failed economic policies.
Lawmakers in Congress should work together to reauthorize the pro-growth, pro-innovation tax policies and provisions passed as part of the TCJA and help keep rural economies and communities stronger and more secure.
Chris Skorupa is the vice president of the Rural and Agriculture Council of America.