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A Change in Tax Policy is Harming Farmers. The Senate Can Fix It.

March 25, 2024

By Isabella Chism

When people outside the agriculture community visit my family’s farm, they’re often surprised to see how much technology we use when growing corn and soybeans. Advanced tech allows us to practice precision agriculture, a data-driven approach to farming that helps us reduce the use of fertilizer, pesticides and other inputs while producing the same amount of food.

But a change in the country’s tax policy is making it harder and more expensive for farmers like me to invest in the equipment that makes those sustainable practices possible. Fortunately, the U.S. House of Representatives has already passed a fix. The Senate must now quickly follow suit or small business owners will be forced to make the difficult decision between reducing investments or raising prices for our customers. Unfortunately either choice will have adverse ripple effects for our communities, our nation — and our planet.

Between 2018 and 2022, companies could deduct the entire cost of investments in equipment and technology in the same year the expense was made. The policy, known as 100% bonus depreciation or full expensing, only applies to investments made in the United States and was available to businesses of all sizes. Businesses ranging from dental practices to construction firms have relied on this policy. Last year, the policy started to expire, and companies could only deduct 80% of the cost of investments immediately. Unless Congress acts, by 2026, the upfront cost recovery option will be gone entirely. 

Speaking from first-hand experience, full expensing can be the difference between investing in a new, more efficient sprayer that reduces pesticide use and makes an operation more sustainable or delaying the expense indefinitely. While the policy was in place, businesses used it to reinvest, so they could better serve their customers, boost wages and grow. 

A 2021 Georgetown University study found states with full expensing had “five percent higher compensation for workers in their manufacturing sectors” than states that did not have the policy. A separate assessment from the University of Pennsylvania’s Wharton School of Business concluded manufacturing facilities that used full expensing increased their levels of investment and employee wages when the policy was in place.

Reinstating full expensing will bring these economic benefits to our country, but it also brings other tangible benefits as well. Full expensing is behind the rapid expansion of 5G infrastructure across the nation, and it’s helped companies bring semiconductor manufacturing back to the United States – two technologies that are vitally important to precision agriculture.

A recent study from the nonpartisan Tax Foundation found the extension would reduce the long-run debt-to-GDP ratio by 0.3 percentage points. Moreover, not acting comes with its own costs. The Congressional Budget Office predicts the phaseout of full expensing will slow economic growth.

With one vote, the Senate can support everyone from farmers to furniture makers. They must stand up for small business and quickly pass the extension of full expensing.  

Isabella Chism is an Indiana farmer and chairwoman of the American Farm Bureau Women’s Leadership Committee.

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