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The Impacts of Tax Reform on Agricultural Households

Author

Listed:
  • Jayson Beckman
  • Munisamy Gopinath
  • Marinos Tsigas

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.

Suggested Citation

  • Jayson Beckman & Munisamy Gopinath & Marinos Tsigas, 2018. "The Impacts of Tax Reform on Agricultural Households," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 100(5), pages 1391-1406.
  • Handle: RePEc:oup:ajagec:v:100:y:2018:i:5:p:1391-1406.
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    File URL: http://hdl.handle.net/10.1093/ajae/aay038
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    Citations

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    Cited by:

    1. Beckman, Jayson & Ivanic, Maros & Shaik, Saleem, 2022. "How Bilateral Trade Deals Get in the Way of Multilateral Agreements," Conference papers 333437, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    2. Jayson Beckman & Amanda M. Countryman, 2021. "The Importance of Agriculture in the Economy: Impacts from COVID‐19," American Journal of Agricultural Economics, John Wiley & Sons, vol. 103(5), pages 1595-1611, October.
    3. Lukáš Moravec & Jana Hinke & Gabriela Kukalová & Adéla Šlapáková, 2019. "Comparison of Tax Burden on Farms in Selected US States," Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis, Mendel University Press, vol. 67(3), pages 839-851.
    4. Hassan, Samir Ul & Khanday, Shafi Ahmad & Ahmad, Masroor & Mishra, Biswambhara & Rymbai, Motika Sinha, 2022. "A Historical Cum Empirical Overview of Agriculture Spending and Output Nexus in India," AGRIS on-line Papers in Economics and Informatics, Czech University of Life Sciences Prague, Faculty of Economics and Management, vol. 14(3), September.

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    Keywords

    CGE; taxes; households; sectors;
    All these keywords.

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