More Than Half a Million Farmers Didn't Pay Income Tax in 2007

DES MOINES, IA - AUGUST 08: Republican presidential candidate Mitt Romney tours a corn field with Iowa Secretary of Agriculture Bill Northey (R) and farmer Lemar Koethe on August 8, 2012 in Des Moines, Iowa. (Image credit: Getty Images via @daylife)

I suspect that when Mitt Romney made his remark about the 47% of Americans who don’t pay income tax and won’t take personal responsibility, he was thinking about the mythical welfare queen staying at home collecting government benefits, although you’d think that a numbers guy would realize that slackers on the dole could only be a fraction of the giant swath of America that he’d dismissed.  As many  have pointed out, those who don’t pay income tax include most retirees who rely primarily on Social Security and a large group of working age people who pay significant Social Security and Medicare payroll taxes (as well as state and local taxes).

It also includes more than half a million farmers, who would seem to epitomize hard work and personal responsibility.  (Yes, farmers receive various subsidies, but those are concentrated on a handful of crops according to Brian Riedl of the Heritage Institution.  Two-thirds of agricultural output, including fruits, vegetables, livestock, and poultry “receive nearly nothing.”)

All told, based on data from 2007 income tax returns, 563,000 tax returns reporting farm income owed no income tax after credits.  That is 28% of such returns.  It is probably an underestimate because it excludes farmers whose incomes are so low that they don’t have to file a tax return.  (The 47% figure includes households who do not file tax returns.)

How do so many farmers avoid income tax?  In part, it is because farming qualifies for some special tax treatment.  The Joint Committee on Taxationlists seven agricultural tax expenditures, but they are comparatively small, totaling just $2.6 billion over five years.  Small businesses also qualify for various tax breaks, such as the ability to immediately deduct many equipment purchases.  (Larger enterprises must spread the deductions over several years.)  But my guess is that most of the farmers who escape income tax do it because they just don’t earn that much money.  Despite working really hard.

My guess is that Governor Romney is aware of this.  The picture above shows him talking to a farmer in Iowa and I assume that he has spoken with others.  I hope he will think about those farmers when he addresses the question of the 47% on Wednesday night.

The best response would be, “I’m sorry.  I was wrong.  I know that a lot of Americans are working really hard, doing the best for their families.  I don’t believe that the big problem in this country is that multi-millionaires like me are over-taxed and that hard-working middle-income families pay too little.  The big problem is that the benefits of hard work have been increasingly concentrated at the top while earnings of lower- and middle-income workers have been stagnant for decades.  I hope that my policies would help rectify that gross inequity, but until they do, I certainly don’t plan to add to the challenges facing the 47% by raising their taxes.”

That would be a flip-flop I could believe in.

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PS, My friend Lauren pointed out that the farmer in the picture is probably a millionaire.  Yeah, probably.  Mitt really does need to get out of the bubble.