Northeast Nebraska Counties Lead the State . . .

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As was the case in 2016, counties in northeast Nebraska had the highest average cash rental rates for agricultural ground in 2017.  Dixon County had the top average rental rate for irrigated ground in 2017 at $312/acre, surpassing Cedar County by $1/acre.  Last year Cedar County topped all Nebraska counties with a cash rent of $324/acre on irrigated land.   Knox, Wayne, Cuming and Platte Counties all had irrigated cash rents above $280 per acre in 2017.  Counties in Northeast Nebraska also led the state in cash rents on non-irrigated land in 2017.  Dakota County led the way at $266/acre, $5/acre less than last year, followed by Cuming, Thurston, Cedar and Wayne Counties.  Pierce and Cuming Counties had the highest 2017 rents for pasture ground at $73/acre.

The maps in the slideshow below, provided in a recent CropWatch released by the UNL Institute of Agriculture and Natural Resources, provides average cash rental rates for irrigated cropland, non-irrigated cropland, and pasture ground across the state. The data comes from surveys of Nebraska farmers and ranchers by the USDA-NASS.

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Jay RempeJay Rempe is the senior economist for Nebraska Farm Bureau. Rempe’s background in agricultural economics, years of experience in advocating at the state capitol, and firm grasp of issues allow him to quantify the fiscal impact of a regulatory proposal, and provide in-depth examination of key issues affecting Nebraska’s farmers and ranchers.

Federal tax reform-a first impression . . .

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The Trump Administration, the House Ways and Means Committee, and the Senate Finance Committee announced last week they have agreed to a unified framework for federal tax reform.  The framework outlines several tax proposals for both business and individual filers.  Many details remain to be filled in, and legislation needs to be written, but the unified framework does provide some guidance for farmers and ranchers on issues they should monitor as the tax discussion evolves.

Most farm and ranch operations in Nebraska file federal taxes as individuals (Form 1040).  The 2012 USDA Census of Agriculture reported that 85 percent of Nebraska farms claimed the legal status of a family or individual for tax purposes.  The average annual federal income tax after credits reported on returns filed by Nebraska farm sole proprietors was $443 million for 2009-2015 according to the Internal Revenue Service (IRS) data (2013 was not included as data was not readily available).  The average annual effective rate of taxation on farm returns over this period was 14 percent, which was two percentage points higher than the effective rate for all Nebraska individual returns over the same period.

For individual filers, the unified framework proposes to double the standard deduction, consolidate tax brackets from seven to three, lower the top rate from 39.6 percent to 35 percent, eliminate itemized deductions except for mortgage interest and charitable deductions, repeal personal exemptions for dependents but increase the child tax credit, and repeal the alternative minimum tax.  So, what are the tax implications for farmers and ranchers?

Like most Nebraskans, most producers claim the standard deduction on their individual returns.  In 2015, according to IRS, 72 percent of Nebraska farm returns claimed the standard deduction.  Thus, doubling the standard deduction has the potential to reduce taxes for these filers subject to other changes in tax brackets and rates, which are not known now.  For producers who itemize, total Schedule A deductions amounted to $196 million in 2015, excluding home mortgage and charitable contributions.  Losing these deductions, and what it means in ultimate taxes paid, will depend on individual filer’s amount of itemized deductions relative to the increase in the standard deduction, and ultimately, the changes in tax brackets and rates.  The proposals addressing the child tax credit and repealing the alternative minimum tax will have little impact on farm and ranch taxes.  Combined, the two provisions amounted to $23 million for farm tax filers in 2015, or 0.7 percent of reported adjusted gross income that year.

At this point, because all the details on tax brackets and rates are not known, the implications of federal tax reform for farmers and ranchers are difficult to grasp.  The changes to business taxes will also have implications for farm and ranch operations.  Future Tidbits will highlight provisions in the unified framework for businesses and other taxes that might impact farmers and ranchers.  Tidbits will also return to the topic of changes for individual filers when more is known on changes to brackets and tax rates.

 

Jay RempeJay Rempe is the senior economist for Nebraska Farm Bureau. Rempe’s background in agricultural economics, years of experience in advocating at the state capitol, and firm grasp of issues allow him to quantify the fiscal impact of a regulatory proposal, and provide in-depth examination of key issues affecting Nebraska’s farmers and ranchers.

Property Tax Credit Averages $2.28 per Acre . . .

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The property tax credit for 2017 under the Property Tax Credit Act will reduce taxes on agricultural land an average $2.28 per acre.  To put the figure into context, property taxes levied on agricultural land for 2016 averaged $26.07 per acre.  The total amount of tax credit provided to agricultural land owners for 2017 will equal almost $105 million, or 8.7 percent of the total taxes paid in 2016.  In other words, without the credit, property taxes paid on agricultural on agricultural land for 2017 would be 8.7 percent higher.
The total credit amount for all real property owners will equal $224 million, an increase of $20 million over the previous year as provided in LB 958 passed in 2016.  LB 958 also provided that additional weight be given to agricultural land in distributing the credit monies.  In absolute dollar terms, Custer County agricultural property owners will receive the most credit at just over $2.95 million, followed by Holt County and Platte County property owners.  In percentage terms, the credit provided to Keya Paha County agricultural property owners will equal 14.6 percent of 2016 taxes paid, 13.6 percent for Loup County owners, and 13.2 percent for Wheeler County owners.   The map below plots the credit as a percentage of 2016 taxes paid on agricultural land in each county.  The more yellow or red the county spot, the greater the percentage.  For exact figures for each county, click here.
 

Prop Tax Credit 9-26-17

Source: Nebraska Department of Revenue

 

 

Jay RempeJay Rempe is the senior economist for Nebraska Farm Bureau. Rempe’s background in agricultural economics, years of experience in advocating at the state capitol, and firm grasp of issues allow him to quantify the fiscal impact of a regulatory proposal, and provide in-depth examination of key issues affecting Nebraska’s farmers and ranchers.

It’s Official-Nebraska Farm Income Dropped for 2016 . . .

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The USDA Economic Research Service on August 30 released its official estimate of Nebraska net farm income for 2016.  The official estimate, $3.78 billion, is nearly $1 billion less than net farm income earned for 2015, and off almost 50 percent from net farm income reported for 2011.

farm income

In fact, 2016 net farm income is just slightly higher than the amount earned for 2010.  A decline in livestock receipts, about $2.1 billion, was the primary reason for the drop in net farm income.  Cash crop receipts were off slightly, but almost equal to that received in 2015.  Farm expenses were down also which helped compensate for the loss of revenue.

The cost of livestock purchases was down $1.7 billion, due to lower cattle prices, and fertilizer and insurance costs were also lower.  It was the third consecutive year net farm income declined in Nebraska, and unfortunately the most recent University of Nebraska estimate suggests 2017 net farm income will be down for a fourth consecutive year.

 

Jay RempeJay Rempe is the senior economist for Nebraska Farm Bureau. Rempe’s background in agricultural economics, years of experience in advocating at the state capitol, and firm grasp of issues allow him to quantify the fiscal impact of a regulatory proposal, and provide in-depth examination of key issues affecting Nebraska’s farmers and ranchers.

Nebraska Economy Stumbles in First Quarter . . .

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The Bureau of Economic Analysis (BEA) at the U.S. Department of Commerce reported Nebraska’s gross domestic product (GDP) shrunk 4 percent in the first quarter of 2017 compared to the fourth quarter of 2016.  Nebraska had the worst first quarter economic performance of any state. The BEA attributed the dismal economic performance to the slumping agricultural sector.  Other plains states, also dominated by agriculture, saw their economies shrink in the first quarter as well.  Iowa’s economy contracted 3.2 percent; South Dakota’s fell 3.8 percent; and Kansas fell 0.7 percent.  Texas saw the greatest first quarter growth at 3.9 over the fourth quarter.  The country as a whole saw real GDP increase 1.2 percent in the first quarter, and the BEA’s first estimates real GDP growth for the second quarter at 2.6 percent.

tidbits 8-1

Not all the news on the economic front was bad for Nebraska. Governor Ricketts and the Nebraska Dept. of Labor announced Nebraska’s monthly increase in non-farm employment in June was 0.6 percent, the third highest in the nation.  Nebraska’s non-farm employment in June reached 1.031 million jobs.  Also, the Bureau of Business Research at the University of Nebraska-Lincoln reported that its most recent leading economic indicator predicts rapid economic growth later this year.  The indicator is a composite of economic factors like building permits for single-family homes, airline passenger counts, manufacturing hours, and the value of the dollar.  All components of the indicator rose in June, resulting in an increase in the economic indicator of 2.75 percent, suggesting a rapidly growing Nebraska economy at the end of the year.

Nebraska’s agricultural economy will continue to struggle in 2017.  The most recent projection indicates 2017 net farm income will fall 16 percent, the fourth consecutive year net farm income will have fallen.  Thus, agriculture will continue to dampen the state’s economic growth.  The first quarter numbers are surely evidence of this fact.  However, it appears the non-farm economy is picking up steam, offsetting the agriculture slump which should help the state post modest economic growth soon.

 

Jay RempeJay Rempe is the senior economist for Nebraska Farm Bureau. Rempe’s background in agricultural economics, years of experience in advocating at the state capitol, and firm grasp of issues allow him to quantify the fiscal impact of a regulatory proposal, and provide in-depth examination of key issues affecting Nebraska’s farmers and ranchers.