F.B. writes:
I read that the Federal Government hands out subsidies to farms that use herbicides, pesticides, fertilizers and gasoline. You ought to look into that! It might help you a lot!
Answer from Coastalfields:
That's true. The Federal and State governmentsallow farms to deduct the cost of herbicide, pesticide, fertilizer and even gasoline from their taxable income. While many farms take advantage of this using
Schedule F of the IRS. Coastalfields cannot: we use none of these.
But don't worry that we are unable to compete because we receive none of this subsidy that our competitors do. Any farmer who wanted to abandon the use of fertilizers, pesticides, herbicides, hormones, antibiotics or other chemicals would never regret doing so.
The average farm in Colorado in 2002 spent 25% of their total expenditure on such chemicals. This allows them to, effectively, earn the amount that they spent on chemicals tax-free (and, because many farms do not even earn 25% above their expenses, some farms effectively earn all their money tax free).
Yet the use of chemicals, manures and composts (even if it is all organic) often decreases the harvest because they increase the risk of crop failure. When you use chemicals, manures and composts, you need to use more every year as the soil becomes less and less healthy. Your costs increase, while your tax-free revenues do not. Eventually, despite all the subsidies the Federal Government can offer, you go out of business.
Farms that use chemicals, composts and manures need all the help they can get from the Federal Government. More, they need help learning how to not rely upon those very chemicals, manures and composts that make subsidization necessary.
Chemicals are not the only thing that farms find subsidized. Farms can deduct the use of gasoline - that necessary fuel to power tractors. Tractors guzzle gasoline by the gallon and are very expensive.
A farmer can deduct the depreciation on a horse as easily as on a tractor, and can even deduct veterinary costs as well! But a farmer who uses a horse has no need to deduct fuel: the fuel-powered tractor, unlike a horse, reduces long-term farm income and per-acre yields.
A horse allows more production per acre at significantly less cost (sometimes millions of dollars worth). A horse allows more rows per acre, and higher yields from those rows; a horse can pull mechanized equipment just as easily (and quickly) as a tractor. Dollar for dollar, hour for hour, a horse provides the same work as a tractor at a cheaper price. Non-monetary benefits of horses are too great to numerate: horses are better for the environment because they pollute less.
Whether your farm produces vegetables or grains, lumber trees or fruit trees, horses out compete tractors every day of the week. Farmers who use tractors require subsidization as much as farmers who use chemicals, manures or composts. Just like farmers who use herbicide, fertilizer, pesticide, hormones and antibiotics, farmers who use tractors find that their deductions simply cannot keep up with their loss in revenue.
The short-term incentive to deduct chemicals and tractors has led to a state of American agriculture that cannot be sustained much longer. Those farms that were not tempted to sacrifice long-term profit for short-term profit are ready to succeed their short-sighted neighbors.
And yet, damage has been done. Though the land which has been destroyed through mismanagement can be repaired quickly and easily, though the ecology can recover, it is easy to wonder why this was allowed to happen in the first place.
There was no malice involved, no corrupt government conspiracy as some people might argue. No, the US Congress and IRS simply try to help American business as much as possible by allowing the deduction of business expenses. As tractors and chemicals became a more typical farm expense, farmers were generously allowed to deduct them.
Coastalfields postulates, however, wouldn't Congress have helped American business to have not allowed deductions at all? The ecology would not have been as harmed, farms would not be facing bankruptcy as land gets depleted. The State could have received 25% more taxable income to be used on schools, hospitals and roads while farms would be more able to compete against foreign farms today. A free market would have shaped a better America.
Free capitalism can be America's greatest strength, the only long-term security for America's future; ignoring artificial short-term gains and obeying the Invisible Hand of Adam Smith is always the wisest choice for a farm.