Farm bill debate to resume in '13; tax laws finalized
"We've already been preparing to make another push to see if we could get a margin insurance program that gives Californians some better protection on the Dairy Security Act. So we are going to keep pushing ahead," he said.
The Specialty Crop Block Grant, plant pest and disease research, and market access programs have been extended with mandatory funding in 2013, whereas funding for other programs important to specialty crop research will be left to approprirations committees to determine.
The fiscal-cliff package also authorized $80 million for livestock indemnity payments; $400 million for the livestock forage disaster program; $50 million for emergency assistance for livestock, honeybees, and farm-raised fish; and $20 million for trees assistance, which have only been authorized and not funded, Pegg said.
CFBF federal policy analyst Josh Rolph said the bill makes a number of changes to tax laws that will apply to farmers and ranchers, including a permanent exemption for the estate tax.
"I want to applaud our membership for making their voice heard in Washington. The new change in the context of the last two years is better than it could have been for the family farm," Rolph said. "We got the higher exemption indexed to inflation, along with much-needed planning certainty that hasn't existed for years."
But, Rolph added, "We won't rest until we have a workable estate tax solution for family farmers and ranchers."
The estate tax exemption now stands at $5 million per person, indexed for inflation—currently $5.12 million—with any unused amount allowed to transfer to a spouse. The maximum rate will increase to 40 percent, up from 35 percent. The estate and gift tax exemptions were unified. Stepped-up basis is already permanent law, Rolph said.
Tim Chiala of George Chiala Farms, a vegetable grower and processor in Santa Clara County, said repeal of the estate tax remains the ultimate goal.
"Our parents and grandparents worked hard to build a farm operation that not only could be passed on to the next generation, but could provide and intrigue the younger generation to go into agriculture," Chiala said. "These family farms and ranches have been paying taxes from the second they went into operation and will continue to pay as long as they can afford to operate. Elimination of the estate tax is what we need, but an extension of the exemption is better than nothing."
The bill also finalized these permanent tax rules:
- Capital gains tax: The top rate will be 15 percent for taxpayers earning less than $400,000 for an individual or $450,000 for a couple. At the higher income levels, the top rate rises to 20 percent.
- Income tax rate brackets will be 10 percent, 25 percent, 28 percent and 35 percent for taxpayers making less than $400,000 for an individual or $450,000 for a couple. There are no caps on personal exemptions or itemized deductions. The marriage penalty is eliminated for many taxpayers.
- Alternative minimum tax: The bill increases the AMT exemption for 2012 to $50,600 for individuals and $78,750 for married filing jointly, and indexes it for inflation.
- Payroll tax: Each employee pays 6.2 percent in payroll tax and the employer pays a matching 6.2 percent. Those who are self-employed pay 12.4 percent.