As past Farm Progress surveys show, farmers traditionally vote more conservatively and now find themselves trying to reconcile what the future political outlook will be under the Biden administration after four years of President Donald Trump. As we recently detailed in our five-part series, the sky is not falling, but farmers need to be aware of what could be coming to best navigate the waters ahead.
The first 100 days of any presidency lay the groundwork for what can be accomplished by that administration. There is undoubtedly a push and pull over different agendas, especially with a shift to complete Democrat control from a Republican-controlled White House and House and Senate just four years ago. It’s hard to claim a voter mandate and hopefully bipartisanship will find its way into proposals. The 50-50 split in the Senate and the narrow majority in the House elevates more moderate members on both sides of the aisle and offers hope for Congress to avoid gridlock.
“I try to tell farmers, divorce yourself from the politics of it and deal with the reality of it. The problem is right now, we don’t know what the reality is going to be until we see how the politics of this plays out,” says Roger McEowen, professor of agricultural law and taxation at Washburn University School of Law in Topeka, Kan. “It’s horrible to have your business dependent on what people in Congress do who don’t understand the full impact.”
McEowen made the comments regarding the tax outlook under the new Congressional and White House makeup, but the same can be said of all the issues facing Congress. As McEowen notes, “Plan for the worst and hope for the best.”
Climate tide changing
If there is one issue that has risen to the top of all the agendas in Washington, D.C. it is an extreme focus on climate change and an integrated strategy to address it domestically; and elevating its importance within national security efforts and foreign policy decisions.
President Joe Biden has created a team of advisers that start at the top with the appointment of both former Secretary of State John Kerry as his international climate envoy and former Environmental Protection Agency Administrator Gina McCarthy as domestic climate czar. Several additional nominees including Secretary of Agriculture Tom Vilsack at USDA. and staff appointments solidify Biden’s desire to direct focus on addressing the climate
Be prepared to hear more about “environmental justice” and not only eliminating greenhouse gas emissions but a move towards net-zero emissions. For farmers, it will be important if agriculture can offer a new revenue stream for actions taken.
Randy Russell, president and partner at the Russell Group, says there is a real opportunity for the agriculture and food industry to get away from the defensive mode and instead turn to offense to change the value proposition of the discussion and gear the focus to how to generate new revenue for growers and producers.
Russell was involved with the Food & Agriculture Climate Alliance formation which now stands ready with a comprehensive plan of more than 40 recommendations in place as discussion heats up on Capitol Hill and with a new administration coming in. Both agricultural and environmental groups came together outlining what provides opportunities for agreement in the climate debate.
Read our full climate coverage here: Biden administration: Tide shifting on climate change discussion
Taxes on the rise
Many agricultural groups put blood, sweat and tears in making significant tax policy advances for agriculture in the 2017 Tax Cut and Jobs Act, and that could all be back on the chopping block with Democrats in control. For farmers, the paramount issue pertains to how the Democrats’ tax policy addresses the estate tax and capital gains taxes on how much capital changes hands at death as well as how farm businesses are set up.
Some proposals include eliminating step-up basis on capital gains. McEowen explains if you don’t get that step-up basis, even a very small farming operation worth $500,000 could see the effective combined federal and state capital gain tax rate of 25-30%.
Biden’s proposed increase in the corporate tax rate from 21% to 28% could incentivize a move away from C-corporations for operating entities, and instead into S-corporations. Farmers need to pay attention to how to best structure their businesses.
Read our full tax story here: Biden administration: What will happen to your taxes?
WOTUS woes return
Over the past four decades, all three branches of government have struggled with how to interpret the meaning of a waters of the U.S. or WOTUS. This has resulted in extensive litigation and confusion on the county level. Rolling back regulations was a cornerstone of the Trump administration and welcomed by farmers. Trump’s end of the Obama-era WOTUS and reintroduction of his revised Navigable Waters Protection Rule offered more power to states on what constitutes a water and addressed the concerns farmers had with the 2015 proposal.
“The big wild card is going to be what courts do on the Clean Water Act,” says Don Parrish, AFBF senior director of regulatory relations. Currently, 14 cases are challenging Trump’s Navigable Waters Protection Rule. He expects the Biden administration to pause defending those cases.
Meanwhile, the Biden administration will have to decide how it wants to remedy finding that sweet spot of what is a waters of the U.S. Parrish says they’ve signaled two key areas of the rule needing changed: ephemeral waters and increasing the amount of waters covered under adjacent wetlands.
Read our full WOTUS story here: Biden administration: Will farmers see another WOTUS redo?
Laboring over labor
As economic issues become elevated in the post-COVID environment, Biden came into office making bold statements on the federal minimum wage and comprehensive immigration reform.
On his first day of office, Biden sent an immigration proposal to Congress, the U.S. Citizenship Act of 2021, that establishes an earned path to citizenship for 11 million undocumented immigrants. It offers immigrant farmworkers, dreamers and individuals with Temporary Protected Status an expedited path to citizenship and would immediately receive green cards. After three years, all green card holders who pass additional background checks and demonstrate knowledge of English and U.S. civics can apply to become citizens.
Allison Crittenden, director of congressional relations at the American Farm Bureau Federation, says broader immigration could provide a legislative vehicle for agriculture’s workforce issues to be addressed. Worker shortages proliferated in 2020, and the H-2A guest worker program does not allow for year-round workers for the livestock and dairy sectors.
Biden’s $1.9 billion American Rescue Plan to combat the COVID-19 included an increase to the federal minimum wage to $15/hour. The $15 level may not be the right amount, particularly in rural areas, however, a scaling or regional approach with ramping up to that level may be more palatable. Although many ag jobs are above that level to try to solicit workers, it could be extremely difficult for the restaurant and foodservice industry.
Read the full labor story here: Biden administration: Labor issues offer pros and cons
Difference in ag trade policy evident
When Biden served as the vice president under President Obama he was chosen because of his experience in Congress on international affairs. As one lobbyist notes, trade and foreign affairs are “Biden’s bread and butter.”
Trump took a more bilateral, individual approach to trade matters, whereas Biden is expected to form more coalitions with like-minded world trading partners to counter China. But Trump’s tariffs against China are not likely to come down immediately as Biden is expected to evaluate his options. The million-dollar question is whether Biden will continue or not continue the phase one agreement and if there will be a phase two.
Biden re-entering or re-engaging with Trans-Pacific Partnership countries could be “something worthy of consideration,” says American Farm Bureau Federation Chief Economist John Newton.
It will be interesting to watch how much Biden follows the precedent President Trump set of running more trade policy out of the executive branch rather than the legislative.
The incoming nominee for the U.S. Trade Representative Katherine Tai speaks fluid mandarin and has previous experience as a China enforcement head with the U.S. Trade Representative. She’s also praised for her help on the House Ways & Means Committee staff in getting the U.S.-Mexico-Canada agreement across the finish line.
Read the full trade outlook story here: Biden administration: New trade approach ahead