By Dennis Sun, Wyoming Livestock Roundup
We are hearing more and more news from Washington D.C. about higher taxes coming our way. For those in agriculture, this is bad news as taxes are always bad for agriculture.
The taxes we are talking about are capital gains taxes, estate taxes and corporate taxes, to name a few. The dollars we pay go straight to Washington D.C. and most do nothing to help our lives.
If one is in manufacturing, and the corporate tax rate goes up, they just pass the costs on to the consumer. In other words, they raise the cost of the product to compensate for the tax.
However, in agriculture, where our products are commodities, the price is dictated by supply and demand. This means when I sell cattle I can’t say, “I want 20 cents per pound more to pay the higher taxes.”
When one sells grain or other crops, adding on extra costs will leave producers with a product no one wants – if products are overpriced, they will not sell.
Higher taxes will just make the farmer or rancher manage for tax write-offs to lower taxes instead of other management decisions to help the farm or ranch grow or, as some say to their accountant, “I want to pay the lowest taxes you can get me and still keep me out of jail.”
To some politicians, taxes are a game. This was explained to me by an article in the Washington Examiner titled, “The real reason Biden and the swamp want higher corporate tax rates.”
The article starts by saying, “Economists will say hiking corporate tax rates doesn’t help the working class or middle class. Budget wonks will say hiking the corporate rate won’t raise very much revenue.”
It continues, “People who understand business and taxation will explain higher corporate tax rates mostly increase economic distortions by pushing corporations to structure their spending more around tax avoidance, effectively letting the tax code and politicians dictate business decisions. Politicians will say this is the point.”
They say, always remember why half of Washington wants higher tax rates and why nearly all of Washington wants a complex tax code full of loopholes, exemptions and exceptions to exemptions – they want to force businesses and earners to seek Washington’s favor. They want people to play the game, and we have to.
High taxes cause everyone to hire someone to look for loopholes and exemptions and this will give special interest lobbyists more work, which will make the politics in Washington, D.C. larger.
Big government needs big politics to survive. Higher taxes cause businesses to focus their management on finding loopholes to pay fewer taxes instead of growing the companies and hiring more people. So we play the games.
Today, we are in a global market and this is especially true for agriculture. As higher taxes cause higher prices for the inputs ranchers and farmers need, American products will not sell well on global markets. Overseas markets will look away.
Big companies in America will look to move their headquarters and manufacturing plants to countries with lower corporate taxes. We have seen them do it before.
The American economy is trying to recover from the pandemic, and higher taxes will only put this recovery at risk.
