Farmer Explains Why Tax Rates Matter

In the debate about higher tax rates for "the rich", Missouri farmer Blake Hurst thinks something is being overlooked.

It’s obvious that the Obama administration does not believe that tax rates on investment are a factor in investment decisions, or that marginal rates on real income affect how hard and how much people work....In all the arguments over incentives and tax fairness, there has been little mention of, well, cash. I’ve read long, learned dissertations on work effort, impassioned pleas for incentives to encourage a rekindling of animal spirits, and exotic calculus in service of whatever agenda an economist possessed before the study was undertaken. But cash is rarely mentioned.

As a small businessman, I can’t argue that I worked harder or longer the year after the Bush tax cuts were passed. I would imagine that my effort was pretty much the same as the year before. The same goes for my investment plan. I invest everything left after living expenses and taxes, no matter what the capital gains tax rate is. I have no plan to sell my farmland or my business. Like Warren Buffett, I’m not selling, so the tax rate on any expected gain doesn’t matter to me.

The only question that matters to the growth of my business is this: how much cash does the tax man leave me?

Without cash, there is no business expansion, which means no new jobs.

When we expanded our farm recently by purchasing a neighboring place, the lender required at least 35 per cent of the purchase price as a down payment. That would be cash. It mattered not the capital gains tax rate, the cost of capital, the expected return, or what Obama considers fair. Business is hard and cash is king.

My wife and I had built the cash reserves necessary to make that down payment on our new farm over a period of years–years, interestingly enough, when the government taxed business and investment income at rates far lower than those envisioned by the present administration. With higher tax rates, it would have taken me many years longer to build the capital necessary to expand my business....My family businesses don’t add much to the overall economic prosperity of our nation. They’re small, not terribly profitable, and are hardly giant engines for job creation or on the cutting edge of innovation. They do, however, employ nine family members throughout the year, with another dozen or so employees during the busy season. Without sensible tax rates on both labor and capital, we can’t build the equity we need to expand in good times and survive the bad times. That’s why tax rates matter.

Yes, tax rates matter in Rhode Island as much as in Missouri, but vehicle, property, restaurant tax increases, etc. (& administrative "fees"!) negatively effect our cash in hand, too.