Taxpayers giving too much to rich farmers
Interesting farm math for an owner of 200 acres of prime Minnesota, Iowa or Illinois farmland receiving $230/acre in annual cash rent:
Costs: $30/acre in real estate taxes, leaving $40,000/year in spendable income, plus the taxpayers will pay about 60 percent of his renter's crop insurance premium ($25) to assure the rent is paid, good crop or bad.
We'll also assume this farmland was inherited tax-free, very common.
So the market value today will vary from $5,000/acre to $7,000/acre or a minimum value of $1 million in today's market, with $4/bu corn and $10/bu soybeans.
Yet the taxpayer still helps with the rent because of fixed USDA annual direct subsidy payments of between $15 to $30/acre, which in reality pays about $20 to $25/acre of the renter's rent or about 10 percent.
Then, if this million-plus-dollar asset were sold in 2010 for $1,200,000, the sale would be taxed at 15 percent capital gains rate for a $1 million gain.
Oh, did I tell you the five-year 2008 Farm Bill is now estimated to be $132 billion over budget? You can see the numbers for yourself at www.CongressionalChange.com. -- Alan Roebke, Alexandria