The Impacts of Tax Reform on Agricultural Households

16 Pages Posted: 21 Apr 2020

See all articles by Jayson Beckman

Jayson Beckman

U.S. Department of Agriculture (USDA) - Economic Research Service (ERS)

Munisamy Gopinath

Oregon State University - Department of Applied Economics

Marinos Tsigas

affiliation not provided to SSRN

Date Written: October 2018

Abstract

Estimates of tax reform's impacts usually concentrate on macroeconomic impacts, but attention at the industry or sectoral level is often limited. Our study uses a computable general equilibrium (CGE) model to estimate the disaggregated impacts of the Tax Cuts and Jobs Act (TCJA) of 2018, which lowered personal and corporate tax rates. Focusing on agriculture, we use survey data to calculate how the TCJA would change the tax rates faced by farmers at the sector level. We use Internal Revenue Service data to calculate tax rates for all other producers. We then simulate the economy‐wide and sectoral effects of TCJA. We find that the TCJA would cause a reduction in agricultural output as resources would be reallocated to other sectors. Using our survey data, we extend the CGE results to measure the impacts to farm households—from changes in on‐ and off‐farm income. We find that most farm households would have income gains from tax reform. Our tax reform scenario highlights the fact that investment weighs heavily on model results. That is, firms that are attractive to domestic and foreign investment have gains in demand for their products, while other sectors, such as primary agriculture, experience decreases in production. A sensitivity analysis that reduces the attractiveness of the United States in foreign investment shows smaller impacts of TCJA, especially for macroeconomic variables.

Keywords: CGE, taxes, households, sectors

Suggested Citation

Beckman, Jayson and Gopinath, Munisamy and Tsigas, Marinos, The Impacts of Tax Reform on Agricultural Households (October 2018). American Journal of Agricultural Economics, Vol. 100, Issue 5, pp. 1391-1406, 2018, Available at SSRN: https://ssrn.com/abstract=3578901 or http://dx.doi.org/10.1093/ajae/aay038

Jayson Beckman (Contact Author)

U.S. Department of Agriculture (USDA) - Economic Research Service (ERS) ( email )

355 E Street, SW
Washington, DC 20024-3221
United States

Munisamy Gopinath

Oregon State University - Department of Applied Economics ( email )

213 Ballard Extension Hall
Corvallis, OR 97331-4501
United States
541-737-1402 (Phone)
541-737-2563 (Fax)

Marinos Tsigas

affiliation not provided to SSRN

No Address Available

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