Tuesday, March 15, 2005

The Legislative Cycle--Payment Limitation--sale

In the last post I discussed creating an entity, such as a corporation, to receive some of the farm payment that otherwise would be left on the table. One other alternative should be mentioned--selling off part of the operation. Assume that the million dollar farm contains owned land. Suppose I can only figure out how to work the rules so that I and my wife receive $750K, meaning $250K is left on the table. If I sell off a quarter of my operation to a new farmer, my asking price will reflect the fact that the new person is eligible for $250K in program payments.

This is the most direct example of the programs increasing the price of farm land. That's what many economists think is the biggest effect of the programs. High land prices mean that it's hard to break into farming, hence farmers are old, on average. The prices help the tax base of the communities where the farms are located. They also provide a cushion--one of the secrets of farming is that you live off your capital.

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