A $6.8 trillion budget proposal was released by the Biden administration on Thursday with the continued “bottom up, middle out” theme, according to USDA.
“The President’s budget provides USDA with the tools needed to serve all Americans by providing effective, innovative science-based public policy leadership at home and around the world,” Tom Vilsack, USDA secretary said in a press release.
The proposed budget includes:
• $19 trillion to be borrowed through FY 2033
• 10.2 trillion in interest on national debt
• $3 trillion in debt deficit reduction
• $6.9 trillion for spending
So, what’s ag’s stake in the $6.8 trillion plan? As is generally the theme in a farm bill, nutrition would take most of the cake.
Nutrition and the Supplemental Nutrition Assistance Program (SNAP)
According to the release, the administration anticipates 6.5 million people will participate in SNAP. To meet these “critical” SNAP needs, the proposal devotes $6.3 billion of a total $7.1 billion in nutrition for SNAP.
“The budget also includes $15 billion over 10 years to allow more states and schools to leverage participation in the community eligibility provision to provide healthy and free school meals to an additional 9 million children,” the release says.
Ensuring SNAP availability is one obstacle. Ensuring food is available for purchase is another issue the budget looks to address.
Supply Chain Resilience
COVID-19 and the Russia–Ukraine war exposed many broken supply chain links. To solder the chain back together, the White House plans to create programs that will:
• Bolster markets through oversight by the Agricultural Marketing Service.
• Safeguard livestock against pests and disease through Animal and Plant Health Inspection Service (APHIS) investments.
• Ensure “safe and healthy” work environments by hiring more inspectors and health officials.
“These programs build on the pandemic and supply chain assistance funding in the American Rescue Plan to address COVID-19 pandemic-related vulnerabilities in the food system,” the plan says.
The supply chain won’t be the only sector to see new or reestablished programs. A similar approach will also be taken up in the climate department.
Cover crop pilot programs would be made permanent if this budget were to pass.
With $208 million more in conservation funds from the 2023 enacted funding level, the NRCS would work to “increase the voluntary adoption of conservation practices that sequester carbon and reduce greenhouse gas emissions associated with agricultural production.”
To put the investments in motion, NRCS would use draw on federal, state and private conservationists to hire “thousands” of employees that would be available to rural America.
These employees would also work alongside climate researchers, which will also be funded in the budget.
In the past, many legislative officials have speculated American ag is falling behind in research compared with other countries. But research might finally see its needs met if this budget proposal passes.
“The People’s Republic of China has become the largest funder of agricultural research and development in the world, surpassing the U.S. and the EU” the report says. “The budget restores American innovation in agriculture by providing a total of more than $4 billion, a $299 million increase above the 2023 enacted level, for ag research, education and outreach.”
Some, including Rep. Salud Carbajal (D-Ca.), feel these research funds are long overdue.
“This administration is taking an important step toward undoing years of underinvestment – as public funding for agriculture research has declined by one-third since 2002,” Carbajal said in a press release.
A letter sent in February to the Office of Management and Budget by Carbajal and other members of Congress stressed the need for increases in ag research.
If these proposed investments are taken-up, Carbajal says American innovation in ag will be “restored.”
Arguably the heaviest hitter in the budget bundle is rooted in tax changes that would make American’s pay “their fair share” toward the nation’s debt, according to Janet Yellen, U.S. treasury secretary.
To ensure the “share” is paid, the budget would:
• Raise the corporate tax rate from 21% to 28%. For most farmers this would be almost an 100% tax increase from 2017 when most farmers only paid 15%.
• Include several proposals to eliminate or reduce tax deductions and credits related to oil and natural gas operations.
Many farmers have ground that enjoys oil and gas revenues. This could indirectly reduce those revenues.
• Any farmer with a net worth greater than $100 million would be subject to a minimum tax rate of 25% on all income included unrealized gains not yet tax.
As an example, assume a farmer is worth $125 million and they have $25 million on unrealized gains not yet taxed. They would owe $5 million that can be paid over 9 years in the first year of this proposal or 5 years thereafter.
Plus, if the asset is illiquid, they could make an election to defer the tax until the asset is sold but would owe an “interest charge”. There appears to be no refund if your net worth decreases.
• Increase the Statute of Limitations from 3 years to 6 years for prohibited transactions and material misstatement of assets in a retirement plan.
• Treat all capital gains and dividend income for taxpayers with more than $1 million of taxable income as being taxed at ordinary rates.
As example, assume a farmer had $500,000 of capital gains and $1 million of other net taxable income. All of the capital gains would be taxed at 44.6%.
The administration wants to make farmers and their heirs pay capital gains taxes on any transfers of appreciated property either via gift or at death. They have increased the exemption amount to $5 million per person or $10 million for a married couple and allow portability of any unused amount at the first death.
So, what are the odds of this budget passing? It depends on who you talk to.
According to Jim Wiesemeyer, ProFarmer policy analyst, democrats in the House and Senate aren’t sure they’ll produce their own budget documents, saying they’ll review Biden’s proposal and only draft their own resolutions if they need to take a different approach from the president.
Paul Neiffer, farm CPA, believes, with the House in Republican control, there is little chance that much of this will pass in