04/24/07 Less Money I n Your Pocket

Less money in your pocket. I'm Greg Martin with today's Line On Agriculture. Let's see&gas prices are up, education is going through the roof, grocery prices  well let's just say dieting should be easier, so how about your wallet? Let's try and deal with all these higher prices and a less money. Right. Less money. Section 511 of the Tax Increase Prevention and Reconciliation Act of 2005 mandates that federal, state, and local governments withhold as tax 3 percent of all payments to contractors for goods and services, beginning in 2011. American Farm Bureau Federation Tax Specialist, Pat Wolff explains the new law. WOLFF: Congress has decided to withhold 3% of all payments that it makes. That means that whenever a framer gets a USDA check for conservation, for farm program payments, for emergency disaster assistance it's going to be 3% less because the government is going to start collecting a 3% tax of all payments it makes. Everyone who receives government payments for goods and services will be affected including doctors and hospitals, small businesses and of course farmers and ranchers. The U.S. Chamber of Commerce has joined with 40 other business groups to fight the tax and Wolff agrees the tax should be repealed. WOLFF: The 3% withholding tax should be repealed. We have time to do that, it doesn't kick in to 2011 so Congress has time to do what's right and repeal this tax. For farmers, the measure is particularly difficult. The tax would be withheld on gross government payments while taxes are due only on net income. That means the amount of money withheld could be a substantial portion of the entire net income of a farm or ranch business, thereby creating significant cash flow problems. The requirement was inserted as a last-minute revenue raiser into the 2005 tax act. And according to Wolff might prove stubborn to budge. WOLFF: This is going to be a tough one. The 3% withholding tax brings money into the federal government. It doesn't really change the amount of money of taxes that people will pay but it speeds up when they pay them so if you are going to eliminate the tax, a wrong tax, you still have to come up with the revenue from somewhere else so that doesn't mean Congress shouldn't do with this tax is wrong. It's wrong to withhold on farm payments, conservation payments, disaster payments but it's going to be a tough sell  not because of what's right or wrong but because of the budget rules. That's today's Line On Agriculture. I'm Greg Martin on the Northwest Ag Information Network.