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Farming the Tax Code: The Impact of High Marginal Tax Rates on Agricultural Tax Shelters

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  • James E. Long

Abstract

Surprisingly little scholarly work has examined the practice of “farming the tax code,” in which accounting losses on agricultural investments are used to shelter other income from taxation. Economic theory suggests that the amount of investment in agricultural tax shelters is positively related to the marginal tax rate. This hypothesis is empirically investigated using a sample of federal individual income tax returns filed for 1983. Both the probability of reporting a farm tax loss and the amount of farm losses are increased by a rise in the marginal tax rate, especially among upper income taxpayers.

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  • James E. Long, 1990. "Farming the Tax Code: The Impact of High Marginal Tax Rates on Agricultural Tax Shelters," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 72(1), pages 1-12.
    • Handle: RePEc:oup:ajagec:v:72:y:1990:i:1:p:1-12.
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    File URL: http://hdl.handle.net/10.2307/1243140
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    Cited by:

    1. Reimund, Donn A. & Gale, Fred, 1992. "Structural Change in the U.S. Farm Sector, 1974-87: 13th Annual Family Farm Report to Congress," Agricultural Information Bulletins 309659, United States Department of Agriculture, Economic Research Service.
    2. Monke, James D., 1998. "Retirement Planning By Farmers: Opportunities In The Taxpayer Relief Act Of 1997," 1998 Annual meeting, August 2-5, Salt Lake City, UT 20815, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    3. Dharmapala, Dhammika, 1999. "Comparing tax expenditures and direct subsidies: the role of legislative committee structure," Journal of Public Economics, Elsevier, vol. 72(3), pages 421-454, June.
    4. Howard Doran, 1993. "Testing Nonnested Models," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 75(1), pages 95-103.

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