I'm from Iowa and a family member does lots of farm bankruptcies here. This is definitely a thing. Farmers buy new pickup trucks in lieu of showing a profit. Pair that in with land purchases at 7k+/acre and the saying "the neighbors land will never come up for sale again while I'm alive" and you've got a good mix for very high stress situations.

Is this just a psychological issue of people being attached to certain parcels or is there some other factor?

There will always be some farmland effectively for sale; but there will also be other farmland which will never be for sale, no matter what the cost. The latter are generally "homeplaces", which have been in the family for generations. Heritage, blood, sweat, and years of hard work bind you to the soil, the land. It's more than an emotional attachment--it's almost spiritual, almost core identity.

It's an essential part of you and who you are.

I have wondered how much this effect is genetically built into us - there really is something different about how people view farmland compared to every other asset.

(However, most businesses don't have the option of the ultimate fallback of subsistence farming if times got really rough. :) )

So yes, if you want to game the system and sit on land, there's little tax incentive to sell it.

People have different risk evaluation and time horizons. If you are sitting on a lot of capital, it’s a no brainer to buy land when financial bubbles pop and leveraged owners need to unload cheap.

Not only do you have a long term inflation hedge, but it’s real property, which means you can borrow against it to get cash without paying taxes via dividends or sale.

Iowa is great for investors like this because the whole state is just a big corn factory. The government tries to keep commodity prices less volatile, so you can project lease income with some precision using the value of corn.

Assuming this is pure farm land (no premium for possible annexation or commercial development), is that not an absolutely batshit insane price? I'm no expert but that seems at least 4x what is reasonable.

In the middle of nowhere there have been quite a number of land sales with $10k+/acre in the past handful of years.

Farmland prices have been kinda crazy over the last 5-10 years.

As a quick example of some math:

* Rent prices for farmland in Iowa [1] averaged $230/acre in 2016

* Yield per acre for corn is 203 in 2016

* Price per bushel averaged $9.27 [3]

Throwing averages into the mix, $1,882 revenue per acre. Without any expenses, farmers could be looking at >5 year time to break even at a 10k purchase price as opposed. Tons of farmers are paper millionaires simply because of the land they own. 100 acres of 10k land gets you there. 640 acres is 1 square mile (much of the state is on a 1x1 mile grid of gravel roads).

And of course I found most of the work already done after I found a bunch of sources. [4] has some more detailed numbers.

[1] http://dreamdirt.com/blog/2017-iowa-farmland-cash-rent-rates...

[2] https://www.extension.iastate.edu/agdm/crops/pdf/a1-12.pdf

[3] https://www.extension.iastate.edu/agdm/crops/pdf/a2-11.pdf

[4] https://www.extension.iastate.edu/agdm/crops/pdf/a1-20.pdf

You quoted the price for beans, not corn. Corn averaged 3.40 over the year (currently, around $3.05 cash, not CBOT). That means it was about $640/acre for income. And that's assuming 203 bushels for all farmland. 180 is a better rule of thumb.

Of course, when a bag of seed corn is selling for $275-300+...not to mention input costs of equipment, fuel, fertilizer, labor (including yours), land (purchase or rent), etc...

The numbers were way better than I remembered, so I kept trying to figure out where the costs came in...I wasn't finding it.

Thanks for the correction.

As my late dad and other old timers said a few years ago, the price of land is tied to the price of corn. Land values (both purchase and cash rent) have fallen the past year or two from their high, slowly but steadily. From a pure numbers standpoint, land prices are still high relative to corn prices, I'd say about 2x as high as some historical years at this corn price (plus historical inflation). I'd like to see it down around $5K/acre in my area.

But there are other factors in the cost too, and that is how much people are willing to pay for land. And guys are still willing to pay for it at this level, although not as many as before. There's still profitability, if you play your cards right. But that's a whole other analysis.

When giving out a loan for operations, a farmer's ability to pay is heavily weighted on farmers having newer equipment. The excuse that I have heard for the bank to do this, is that the bank can't easily tell which farmers take better care of their equipment, thus favoring the newer equipment across the board.

The agents working directly with the farmers advocate for this, as there are internal incentives for making larger loans.

But on the other hand, I see people driving antique beaters and doubt they have the capability or interest to manage any maintenance.

The busiest week for farm equipment dealers is the week between Christmas and new years. That is when their account calls them and says trading in some machine would reduce their tax bill by more than the payments! Assuming the trade in value is high enough of course.

Farmers are businessmen running a real business. They understand how to use all the loopholes written for them.

This is all well and good, but now you've just shifted the profit to Profit LLC, and what to do with it there? If it's an LLC, whoever owns it has to pay income tax on it. So if you, the farmer, own Profit LLC, you're still paying taxes on it. If Farm LLC owns it, then the profit just goes back to Farm LLC, undoing the whole purpose.

So maybe you decide to make Profit LLC a C-Corp instead, so it's Profit, Inc., with the idea that now it's no longer a pass-through entity. But now you have to pay corporate income tax on it, even if you don't distribute it. Then, when you distribute it someday, you have to pay regular income tax on it again.

Some companies (such as Toys 'R Us) used to get around this by having "Profit LLC" be a company that owns the brand and licenses it to the retail company, to eliminate the retail company's profits. They then locate Profit LLC in a low/no-tax country such as the Cayman Islands. It's not clear how this would work for a farmer, however, because there's not really a brand to license, and any company that owned the land would still fall under US tax jurisdiction.

(Not a lawyer, not a tax preparer.)

The US tax system is really insane some times

Is it even 5%?

Which is what the parent of this thread was saying.

The consequence is that in bad times, the company has to borrow (if it can) or goes bankrupt. Which happens often. We don't generally shed tears over this kind of thing, but this story points out the human tragedy that passes when individuals follow the same strategy.

Personally I kinda feel a little meh about the subject. My heart goes out to every struggling business(wo)man - it's hard to make it on your own. But farmers are especially insulated against market forces by a giant morass of subsidies and land use regulations. They're already getting a much bigger handout than they deserve.

Smaller businesses yes.

Big businesses get even more subsidies than farmers -- and not just subsidies.

Of course they do. They are using legal means to reduce their taxes. Why wouldn't they.

Would you decline your mortgage interest deduction, your solar energy or EV deduction, etc. so you could claim you are paying your "fair" share? Go ahead -- nothing is stopping you.

[1] https://www.bloomberg.com/news/articles/2017-03-10/ten-thing...

Paul Graham, The Acceleration of Addictiveness

It has also been my observation that there is a sort of victim mentality that many farmers embrace, they can be legitimate multimillionaires but would rather be seen as poor and bullied by the banks, government and elites.

https://www.sba.gov/blogs/6-things-you-need-know-about-your-...

Getting creative, of course... But you know, a legitimate business would never operate like this, right?

They wouldn't take such a "subjective" point of view, when interpreting what are typically held as "objective" values and facts with only one single interpretation of The Truth, right?

Oh, wait...

https://en.wikipedia.org/wiki/Hollywood_accounting

The debate about double taxation of corporate profits relates to taxation of dividends, which are neither exempt nor deductible from a business' taxable income. Because shareholders are one and the same as the corporation according to some strains of legal and economic reasoning, by taxing dividends you've taxed the shareholders' profits twice.

If you control a corporation, you could achieve the same tax treatment as pass-through entities merely by paying yourself a salary instead of dividends. But if you did that, pass-through entities are easier because there are fewer formalities involved. The real gripe is that because dividends are taxed at a flat 15-20%, paying yourself in tax-preferred dividends is a tantalizing prospect but-for the supposed double taxation "problem".

The debate is admittedly a little more nuanced when discussing passive investments, but that's a different context than family farms.

Edit: Yes, I meant distribute for taxation purposes (K1 form), not actually transfer the funds

Edit: you can’t keep an untaxed rainy day fund, that’s true. If you keep cash in the business from one year and use it on expenses the following, you deduct those expenses for the year they occurred. If that incurs a net operating loss you can carry that loss backwards or forwards if you want.

In the cross-tax-year case, you pay the chargeback from the historical profits you have been booking from the LLC and book it as a business expense in the current tax year.

If you are running an LLC with zero cash backup to handle such situations, there could be a problem with the business model.

Your business having a illiquid depreciating asset that is required for the business to function can still be struggling. You can't eat a combine, you can't trade it away.

This is usually solved with coops owning the equipment and time sharing it to distribute the costs among the coop participants.

Farmers are indentured servants to the commodities markets, the land owner's they rent their land from, and John Deere.

Now you can rent semis, but it isn't cheap. For a farmer the rental company will look at it as a semi that won't be rented for 10 months so they charge for it.

Point being, the expensive equipment that is effectively being rented (with the labor in our case) isn't sitting idle most of the year. It's being used in different areas.

In the mind of the farmer:

* $150,000 tractor: something that has value (not easy to calculate, but a $150k tractor has a value above zero, even if not brand new) and utility.

* $30,000 to the IRS: money that I will never see again. Literally thrown away money.

Option number 1 is very tempting.

Averseness to government is taxation is so engrained in some country it is almost genetic...and it leads to utterly bad thinking by individuals.

http://www.theamericanconservative.com/articles/why-is-defen...

https://www.thenation.com/article/the-united-states-probably...

https://www.theguardian.com/commentisfree/2017/mar/20/pentag...

Their thinking with regards to taxes is that it's spent on one of the following:

- Welfare, which is supposedly rampant with fraud to the point that most people who are on welfare don't "need" it

- Unspecified government waste

Not that these don't exist- it's just that it's the majority of government spending, according to them.

If taxes are cut, they claim welfare will get cut, forcing people to find work, and that government will somehow cut their other wasteful spending while still managing to fund the necessities.

I live in suburban NJ, so it's a bit easier for me to see where my taxes go- police, fire, public transit, a handful of schools. But in rural America, where 911 response times can be around 30 minutes, there's no train to get to a nearby city, and there's only two schools in your town? It looks like that money vanished.

If you're a strict old-school limited govt jeffersonian type, as many farmers are, fighting income taxes and avoiding paying into federally mandated systems is your civic duty..

not saying I agree with either side - but pointing out that notions of 'civic duty' are not so cut-and-dried

Just because something is worth doing does not mean you can throw money at it with no regard to efficiency.

They have an hour meter for a reason. This is really what people use to tell if it is new.

Now if they sell the tractor they have to pay taxes on the full sale price as profit since it was previously worth zero.

many farmers dont.

also: these are not distributed evenly (see also agribusiness)

Additionally some debatably large portion of tax money is wasted or spent on things you completely disagree with, no matter what your political perspective.

Roads alone are very expensive, over a million bucks per mile in rural areas. Wyoming has 33,000 miles of road serving a population of 550k. That works out to at least $60k per person in just to build the roads, never mind maintaining them. And not having these roads means higher transportation costs, which translate to more money spent on goods and more profit being lost to transporting sales.

There are plenty of countries in the world without individual taxes, they just also happen to be places most people don't want to live.

This is a commonly repeated myth, but is not usually true. Road costs are far lower than often claimed. A 2-lane asphalt road construction costs about $800k on average and lasts approximately 30 years with proper maintenance. (Using MDOT numbers, since that's what I happen to have on hand).

In Wyoming, this works out to $1,600 per person per year ($133/month/person). But that assumes every single road in Wyoming is paved -- they aren't. I don't know the accuracy of this, but the University of Wyoming claims only 20% of a county's roads are paved in the state, on average, so real costs are probably much lower.

In states with any significant city whatsoever, the costs drop dramatically. Michigan, for example, has 120,256 miles of road serving 9.9 million people, 75% of which are rural. That's a total road cost of about $360 per person per year ($30/person/month).

[0] https://osc.state.ny.us/reports/budget/2015/fed_budget_fy201...

I can't find a more recent pre-compiled source, and too lazy to run the numbers myself. I doubt it has changed significantly enough to make the

only when competing against imports from defacto slaves in other countries..

There is some level of self-sustainment but it's a myth how 'independent' people really are.

They might be detached from the federal side of things but they still also have to interact at a state level.

Only off-the-grid homesteaders can make any credible claim to having no connection to society at large, but if they get sick, they better be honest with themselves and just die at home instead of going to get healthcare from a system they elected not to contribute to.

You go really far down the civilizational chain if you remove these mechanisms. Almost all the way down to primitivism.

Whose definition of "good" are we using? Clearly not mine, as my definition of "good" demands consent.

And is it hypocritical to live in the West and take advantage of all the benefits it gained from centuries of imperialism and exploitation, while criticizing that behavior?

I'm not against taxation, but that's some BS logic.

I think the ideas of anti-taxation is often hypocritical, too often you see people critize tax cuts that do not serve their other beliefs. Mind you, this is not an argument against tax cuts, I just think anti taxation is an pipedream.

Unless you want to argue about people paying more in taxes than they (feel they) get in benefits. In which case, well, the most rabid anti-tax people generally are getting far more benefits than they pay for (and are busily re-rigging the tax system to tilt even more in their favor).

If the claim was that anti-tax people demand both not paying tax and that others do, then I wouldn't have posted. Although I'd say that just selfish, not hypocritical.

But that is exactly it. They want all the benefits of living in a modern civilized society, but they don't want to pay their share of keeping that society going.

Also, the claim that it's all hypocrisy reminds me of this bit from the TAL episode "What Kind of Country":

Jan Martin: And a gentleman came up to me and actually thanked me for the adopt a street light program. He had just written a check to the city for $300 to turn all the street lights back on in his neighborhood. And I did remind him that for $200 if he had supported the tax initiative, we could have had not only streetlights, but parks and firemen and swimming pools and community centers. That by combining our resources, we as a community can actually accomplish more than we as individuals.

Robert Smith: And he said?

Jan Martin: He said he would never support a tax increase.

Not in the US, which is mostly the offender, and no country will ever attempt to attack it (domestically), even if US kept just 1/10 the military resources it has, unless provoked purposefully for months on end into doing so (e.g. Pearl Harbor).

Politicians focus on bigger voting blocks, while rural communities (in their mind) pay for those promises.

But in the USA, just as coastal areas subsidize inland areas, typically urban areas within a state subsidize the rural areas. Definitely true of California counties, and I'd be very surprised if this wasn't true of any particular state.

If you believe in wealth distribution, then richer coastal or urban areas should help out their brethren in the rural areas and spread the money around. It's when those rural brethren then attack the better off coastal / urban folks as stealing their money that things become problematic.

And then complain about being the neglected or down-trodden ones.

As far as what I prefer: I have no issue subsidizing rural areas, within reason. I support everyone having access to basic infrastructure, healthcare, and education, regardless of where they live. Beyond that, there's no particular reason for government to provide incentives to live in one or the other; let the market sort that out.

NY-SAFE is a good recent example of the city doing one thing despite the objection (as opposed to apathy) of everywhere else.

The reality is that they may not know of the giant pothole on County Road 18 or the rampant littering in certain areas. It may not always work, but informing the local government of issues might get you what you want. After all, you are the constituent that gets those people into office. Let them help you.

While not on the same level as the US, Canada still provides significant farm subsidies, which comes from.. tax revenue!

I feel like this comes up any time someone does something to avoid paying taxes, as if that necessarily means they want no government at all. They (the farmers) will see no appreciable difference whether they pay the tax or buy the tractor, so they choose the tractor. That doesn't mean they don't want roads.

My point: Nobody wants to pay taxes they don't have to, and farmers are no different from upper-middle class blue state residents in that regard. It doesn't mean they literally don't want roads.

That blue state residents already pay more in taxes than they get back is irrelevant. Nobody wants to pay more in taxes, and that doesn't mean nobody wants roads.

Bullshit. I'm happy to pay more in taxes if it means that the society I'm a part of improves as a consequence.

Whether money from a tax increase is well spent is another question, however.

I wonder if this is the result of most people taking the standard deduction instead of itemizing at tax time.

But that being said, a 15-30% discount because you used a different credit card to buy it is a pretty good incentive.

I'd venture that a lot of people are typing all this info into their tax software, which summarily throws it all away without them really understanding that that's what's happening.

Regular folks just do not get this stuff and it's silly that we have such a complicated system.

See also: depreciation on a $150K tractor I didn’t need.

This, in my experience, drives a lot of insane opinions about taxes.

In fact, I can't think of a thing where this isn't the case. Can you provide an example?

THIS

If the tax code was easily understood, these steep/jagged areas of the tax curve wouldn't exist. Even my accountant seems to struggle with the amount of variables when I ask similar questions.

"Well if I give you a raise, you won't get more money! Get back to work!"

Farmers aren't stupid. They're doing what makes them the most money in the long run.

In the meetings where farmers as well.

The company said the system was designed by Steve Wozniak at Apple and very reliable.

Farmers did not want to buy it but rent it instead.

Why?

When you rent equipment you can claim it as an expense on taxes, anything from a telephone to a computer to tractors, etc. Another reason is if they broke, rental company would fix it or replace it with another one.

Don't you think that PERCEPTION is a horrible mindset?

Less sympathy to people's stresses because they haven't lost their dignity.

This applies to street beggars, immigrants, etc.

The stuff I've heard are appalling. Formally middle class immigrants getting less empathy because they have cell phones. "Hey they should have sold the cell phone thats not a prerequisite to communication in 2017, their priorities are way too off for them to deserve any support"

Back to the topic at hand, maybe thats part of the suicide!

Not to get too off topic here but during my college years I worked at a grocery store. I found it unbelievable how many times I had to listen to a customer complain about the cell phone that the customer who was in front of them had. "I just don't understand how they can afford a cell phone if they are on food stamps!"[0] "Uh cool, would you like plastic or paper?"

Keep in mind that a trac phone plan is less than $15 dollars a month and even cheaper if you are careful with it... but I wouldn't have dared tell the outraged customer that. It's always crazy to me how people think they can solve another persons life problems based on a 15 second observation.

[0] In Massachusetts the food stamp cards were/are a distinct blue color and easy to spot.

Or is criticism not acceptable at all?

Though what it pushes down isn't all better, with niceties such as "the market is doing a good job at signaling that they probably need to change professions"

Fucking HN. Seriously. I want textfiles back.

> Is it possible to criticize decisions and have empathy at the same time?

Yes, it's possible, but it's not done here.

> Or is criticism not acceptable at all?

Are you projecting? Whenever the glaring soullessnes in a HN thread is criticized, it's downvotes and hair splitting.

Yes, it's technically possible to have empathy and also criticize, but due to the sequential nature of communication even when you do both, you have to decide what to do first. When the whole page is taken up by chatter, the empathy exists somewhere below the "More" fold, if at all.

Yes, criticism is acceptable. As long as criticism of the criticism, such as calling it heartless victim blaming as I would, is also acceptable. Otherwise, the right to criticize is forfeit.

wasn't from the people I saw, typically coworkers, friends, their parents