"It is part of a long-term effort to help equip farmers to survive the down times and prosper during the good times," Grassley said. "Our farmers work long and hard to deliver the safest most affordable, quality food product available in the world. Yet farming is one of the riskiest ways to make a living. My bill provides another risk management tool for those who put food on our tables."
Grassley said that the "FARRM accounts" his legislation would create are patterned after individual retirement accounts. Specifically, the Farm and Ranch Risk Management Act of 1999would let eligible farmers to contribute up to 20 percent of their taxable income into a tax-deferred, interest-bearing savings account. Funds could accumulate in the FARRM account for five years and be taxed upon withdrawal. The interest would be taxed the year it is earned. If not withdrawn after five years, the money would be taxed as income and subject to a 10 percent penalty.
"This tax tool would leave business decisions in the hands of farmers, not bureaucrats at USDA or members of Congress. The farmer would decide whether to defer his income for later years. The farmer would decide when to withdraw funds to supplement his operation," Grassley said.
Grassley said that when prices are high, farmers often pay so much of their income in taxes that they're unable to save anything. In turn, when prices drop, farmers can face liquidity problems. "This bill recognizes the many risks in farming. In addition to weather fluctuations, farmers face great uncertainty in international markets, as we've seen during the last year," he said.
Grassley is a senior member of the tax-writing Senate Finance Committee. Fifteen senators co-sponsored the bill that he and Sen. Max Baucus of Montana introduced today. A similar measure has been introduced in the House of Representatives by Rep. Kenny C. Hulshof of Missouri
Grassley is an outspoken voice for family farmers and American agriculture. In addition to seeking tax fairness and relief for farmers, he is working to break down international trade barriers, open new foreign and domestic markets for farm products, make Chapter 12 a permanent part of the federal bankruptcy code, budget for a viable risk management farm spending package, monitor mega-mergers in agribusiness, level the playing field for independent livestock producers, and win fast-track trade authority.
March 14-20 is National Agriculture Week.