Editor’s Note: Agricultural leaders sent the following letter to Congress June 13.
Having overseen our state’s vital agriculture industry for the past several years, we urge you to support the preservation of Section 1031 in our tax code – or the “like kind” exchanges that benefit many of South Dakota’s farmers and landowners. Doing away with the long-standing provision would undoubtedly be damaging to our economy, and would prove to be a misstep, as it would discourage taxpayers from making investments in our state.
We certainly understand the need to reform our convoluted tax code and eliminate government red tape. But we must not forget about the purpose of our government and its opportunity to provide incentives that encourage growth, not stagnation.
We know that agriculture has always been the lifeblood of our state’s economy. In addition to employing over 115,000 South Dakotans, the industry brings an annual economic impact of over $25 billion. While techniques have evolved over the years, the industry’s influence in connecting communities with a sense of sustainability has never changed. Neither has the drive for our citizens to invest in our future by owning and selling farmland.
Section 1031 in our tax code has, for many years, served as a powerful investment tool for South Dakota farmers. It allows the process of buying and selling farmland to act more seamless, and we welcome that ability in our state. Some of us have personally experienced the benefits of this provision within our agriculture community or on our own farmland.
While like kind exchanges are a tremendous savings opportunity, they should never be characterized as a tax avoidance scheme. The tax on the gain of the sale is merely deferred, and the exchange functions as a stepping stone toward further investment. In a climate where taxpayers face economic hurdles at every turn, we should applaud the provisions in our tax code that act as an advantage for growth.
As Congress moves forward on tax reform and puts together a package for the 21st century economy, we ask you to consider the benefits that Section 1031 brings to our farmers and to our state economy at large. Thank you for your support of agriculture and of those who invest in our state’s future.