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What if there are no tax write-offs?

GREG PETERSON 08/10/2011 @ 3:32pm Greg Peterson writes "Machinery Pete" column for Successful Farming magazine and appears on the Machinery Show on RFD-TV, talking about trends in the used equipment market

What if you couldn't write off that new or used equipment purchase for tax purposes anymore? How would that major change affect new equipment sales and used equipment values?

What if?

Two little words. 99% of the time the phrase "what if?" seems utterly mundane. What if we have green beans instead of salad with dinner tonight? Sounds good. It's that other 1% of the time the phrase "what if?" takes on whole new importance and weight.

We're in that 1% zone right now.

The fiasco in Washington with the debt ceiling debate. S&P's downgrade of Uncle Sam's credit rating. European economic woes. The stock market drops 630 points on Monday, bounces back big Tuesday, last I heard today it was down large again. Our country and world are definitely in a state of economic flux right now, no denying that.

So now come the "what ifs?"

The agricultural community is much more accustomed to and comfortable with dealing with these "what if?" questions vs. the general population. The stock market starts bouncing around and folks freak out. Farmers? Decades of dealing with fluctuations in commodity prices, input costs and land values and how these fluctuations affect your bottom line toughens you up. By necessity.

A more risky profession than farming? Show me.

So the ag side is comfortable and experienced dealing with risk on a daily basis. With our country wobbling towards a potential double dip recession and Washington running low on money come new "what ifs" for agriculture. One we saw coming..."what if" ethanol subsidies are curtailed and/or phased out? No bifocals needed to read that handwriting on the wall.

My take? Seemed like collectively ag was rolling with that punch.

The past few days a new "what if?" has arisen. What if, in the name of increasing revenue and increasing fairness, our tax code is changed, loopholes and deductions are taken away, what would that mean? Until the last few days I assumed no way in heck Washington could ever summon the kind of fortitude necessary to tackle this job.

But then the stock market started to melt, just like Fall 2008.

Yesterday I'm reading my morning newspaper and there's an opinion piece by conservative columnist Charles Krauthammer of the Washington Post advocating for tax reform and removing loopholes. In this morning's paper, another opinion piece calling for a modified flat tax.

So again, my question, what would happen to new farm equipment sales and used equipment values if the tax write-off (IRS section 179: 2011 deduction limit $500,000) was taken away or greatly scaled down? No big deal? Sorry, a very, very big deal I think.

Game changer. New iron sales? Screech. Used values? Dip.

Will the tax code be changed? I don't know. Wouldn't have thought it possible until this week. I can only imagine the fierceness of business lobbying to maintain the Section 179 deduction dollar amounts in the name of investment and spurring growth. Probably won't happen.

But what if?


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