Item One: The "adjusted gross income" means test proposed by the administration:
To receive commodity payments, producers must also meet a limit on Adjusted Gross Income (AGI), which includes wages and other income minus farm expenses and depreciation. This plan reduces the AGI limit of $2.5 million to a new limit of $200,000. If a producer has an annual adjusted gross income of $200,000 or more, that individual would no longer be eligible for commodity payments. Internal Revenue Service (IRS) data for 2004 indicate that 97.7 percent of all American tax filers have an AGI under $200,000.Item Two: A Congressperson reacts:
"Two hundred thousand dollars to the average guy is a lot of money," Chambliss said. "But what we in agriculture know is, $200,000 in adjusted gross income means once you get to that point, then you've got to pay for that $250,000 combine, that $100,000 tractor that you've got to have to operate your facilities."Folks, these are two unrelated events.
Let's review briefly. Grasping your Form 1040, skim down to Line 37, labeled oddly, Adjusted Gross Income. Now notice that it includes all income (wages, farm income, capital gains - the whole pile) minus adjustments for health insurance, moving, and whatever else Congress thought was a good political move at some time.
The important thing for farmers is Schedule F income shown on your 1040 (line 18) is NET farm income, not gross. The gross income goes on line 11 of Schedule F. The cost of new combines and fertilizers and pickups has already been accounted for by the time the AGI is calculated. We call the machinery stuff Sen. Chambliss moans about "depreciation" (Sch. F, line 16). Perversely, those rules have been seductively generous for some time. (Which is why I am sooo doomed in 2008 when all mine runs out thanks to Section 179)
You don't have to love the proposal, but at least read the instructions.