Academic journal article Washington and Lee Law Review

Saving the Family Farm through Federal Tax Policy: Easier Said Than Done

Academic journal article Washington and Lee Law Review

Saving the Family Farm through Federal Tax Policy: Easier Said Than Done

Article excerpt

I. Introduction

The economic importance of the family farm, as well as its place in the rhetoric of political leaders, has changed dramatically since the birth of the United States. Thomas Jefferson advocated an agrarian economy where the ideal citizen was an independent yeoman farmer.1 In the post-Civil War era, the promise of "forty acres and a mule" meant freedom and opportunity for former slaves.2 During the Great Depression, Congress and President Franklin Roosevelt coordinated their efforts to ensure the survival of small farmers through such legislative efforts as the Agricultural Adjustment Acts of 19333 and 1938,4 the Soil Conservation and Domestic Allotment Act of 1936,5 and the Agricultural Marketing Act of 1937.6

In the twenty-first century, Jefferson's agrarian ideal has given way to the reality of the modern industrial economy where the small family farm has lost its predominance as an economic player.7 For most people, the American dream is no longer forty acres and a mule, but a comfortable home in the suburbs and a well-paying job.8 The modernization of agriculture substantially transformed the family farm itself with the result that any large-scale legislative efforts in the agricultural arena directly benefit a much smaller percentage of the American population than in Roosevelt's era.9

One byproduct of the changes in agriculture and the national economy has been the gradual extinction of America's small family farms.10 Without serious government intervention, these farms will continue to the off." But there is much more at stake than the loss of the farms themselves. The survival of small family farms is vital to the national economy because such farms remain important sources of food production and crop diversity and because they help to counteract the market dominance of agribusiness.12 Additionally, the American public benefits from the existence of small farmers because they support rural communities, preserve open spaces and the environment, and serve as a source of values and tradition.13 By dispersing food production, family farmers also help to keep the nation's food supply safe from contamination and bioterrorism.14 For these reasons, it is in the federal government's best interest to take action to ensure the survival of small family farms.

Questions remain, however, about the appropriate and necessary means of preserving family farms. One approach is federal tax reform. Over time, Congress has enacted and amended a number of provisions of the Internal Revenue Code (Code) designed to benefit family farmers either directly or indirectly.15 Recently, the family farm again rose to the forefront of American politics when Congress passed the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA),16 which significantly alters the current estate and income tax regimes. Notably, one of the main policy goals of the Act, according to its supporters, was to save the family farm.17 This claim has generated extensive scholarly debate over the effect EGTRRA will have on family farms and whether it will actually benefit family farmers.18

This Note asks a different question: If Congress really intends to modify the Code to save the family farm, what alternatives would advance or hinder this objective? The analysis rests on two basic ideas. First, a successful Code provision will effectively address the problems that are driving family farmers from the industry without jeopardizing efficient food production. If a remedy fails in this regard, family farmers will continue to lose ground while the government wastes tax resources. second, to actually benefit the family farmers that need help, Congress must draft a Code provision that effectively targets that group.19 Applying this framework to several current Code sections, EGTRRA, and some proposed alternatives, this Note attempts to identify the tax legislation that best advances the goal of saving the family farm.

Part II of the Note lays the groundwork for the two-pronged analysis of the effectiveness and targeting of various pieces of tax legislation that affect family farms. …

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