I appreciate the thoughtful and civil comments regarding the "1031 recommendation" in the Bush farm bill proposals. I thought, "What would Milton Friedman do?" and came to these suggestions.
- My favorite: Don't give subsidies to 1031 exchanged ground. Don't give them to any other ground either. It is simple, fair and saves taxpayer money. But as many of you have pointed out, the only farmers who think subsidies are the problem, not the solution are me and Bob and Gene and this guy I met in Nebraska a while back. So I'll give that idea a rest.
- Lower the capital gains rate to 8%. Lowering the capital gains tax rate has been shown to increase capital gains tax revenues. You read that right. Of course, lowering it to zero (which some recommend) would generate zero tax revenue, so somewhere between the current rate (15%) and zero there could be a peak. My guess is around 8%. Interestingly, I once asked a 1031 exchange expert what rate would make the expense and hassle of such exchanges more trouble than just paying the tax. His answer was "about 8%". So lower the rate to 8%, get more tax revenue, and slow drastically like-kind exchanges by encouraging investors to just take the cash instead.