What the heck is this about?

[bruce MN]

Are their income taxes all to high too high?

http://www.startribune.com/business/104213838.html?elr=KArks:DCiU1OiP:DiiUiacyKU7DYaGEP7vDEh7P:DiUs

[hardnox604008]

1) Obviously heavy in dairy

2) Some hog guys also finally running out of gas even if margins look positive at the moment.

3) In crops, if for whatever reason (marketing, production) a crop producer failed to gain the windfall 2006-2008 and is now facing costs that have nearly doubled, that is a problem. Particularly if the balance sheet wasn't strong to start with (not a lot of inflated land value).

Since I'm in a pretty sour mood these days anyway I would offer the observation that banks have to be sitting on a very large amount of exposure to large operations but are hesitant to book losses of that magnitude so they'll try to make the regulators happy by picking off a few of the smaller guys. TBTF, extend and pretend everywhere you look.

[kraft-t]

In my opinion, it's the same old same old. With windfall profits some farmers see it is an opportunity to spend more rather than retire the debt they already owe. This is not a new phenomenon. It seems like we all have to go through that phase before we grow up.

The last windfall should have  produced stronger financuial statements. Instead we aare finding people living on the edge of bankruptsy. 

[wehav]

I fully admit to not reading the article as I've stated before take a moment to give a synopsis of what the article is about.  Most of the articles posted could be condensed into 100 words or much less.  If you don't want to take the minor effort to do that I'm not going to normally take the  time to read a url that probably is full of beans anyway.

However with regard to retiring debt you can blame government to an extent.  Buy a piece of property or equipment and avoid losing all that money to taxes.  Pay off a piece of property and lose upt to 45% of the money to taxes.

2 guys sell corn, sell corn the same day for the same price and both sell the same amount but one gets more money.  You know why.

[kraft-t]

So how do you expect to retire your debt? With tax free income or gifted proceeds? That is why I advocate a loan journal fro borrowers of substantial sums. Not only does it give you a picture of your loan obligations but when they are due and what what you owe including interest due. That is most helpful in  helping you match up income flow to meet your debt obligations.

However, it is also wise to match up your principal payments with after tax income sources. Your borrowed money may well cost you 30 to 40 percent more than the original borrowed funds. Your Government is quite generous in allowing quick depreciation when you purchase an asset but you indicate that you are disatisfied that you must pay taxes on the money used to retire the debt.

Just pay cash for the item and then you will use up your tax saving when you purchase the item. You won't be troubled by those pesky taxes later on.

Why do I think you are opposed to any tax responsibility. Who do you think should pay the tax that you don't?

[hardnox604008]

I really doubt that much of this, at this point in the cycle, is about "spending too much."

Sure, all of us would be richer or sounder financially if over the past 20 or 40 years we'd not spent on this, or bought that or wahtever.

But I think this is much more about the fact that a lot of folks who weren't that strong to begin with and didn't make a killing on the bubble, for whatever reason, are now highly vulnerable.

BTW, as I noted- a lot of those have to be dairies and among other things we've simply had government decide to transfer equity from livestock producers to grain producers via ethanol. One can also argue that the gov't did the reverse with 8 years of big LDPs. I'd suggest both were flawed policies but I don't think anyone cares.

Winners and losers- and a lot of the winners are retired people who don't "need" the money. Hope they're paying their taxes.

[kraft-t]

There are a lot of thinks I could spend money on. More grain storage, drainage tile, all of which could receive fast depreciation and liower taxes.  However, I want to pay taxes because my objective is after tax income to retire real estate debt.

There are many that advise me to not worry about the debt and continue payments til they mature. I am now plus 70 and can read thenwriting on the wall. I want to retire that debt before my demise so my wife and children won't be burdened with it. When my dad died, the only debt he had was the light bill and the phone bill that hadn't been sent.

I think that is an honorble objective. Besides If I don't pay taxes who will. Tax avoidance seems to be the primary goal of many farmers. Conclude what you want about that.

[wehav]

Tax avoidance seems to be the goal of most people.

And many of them are doing an excellent job, somehow they manage to not only avoid taxes but get tax dollars.  Why should farmers be any different?

I commend you for not wanting to burden you family with debt but there is a neat thing call life insurance that would cover the problem.

[kraft-t]

You assume that everyine qu7alifies for life insurance. However, I would prefer my dollars go toward the debt rather than insurance premiums. BTW if you want to insure your life or extendcare insurance, I would urge you to act now.

[Canuck_2]

Kraft-t you have a good point about taxes. One that some ignore in an effort to not let the government have any of their money.

That desire to 'keep it all' causes them to do things that are not good business decisions.

A wise friend/neighbour once told me the only way you can really get to 'use' your money is to show a profit, pay the tax and then the money is yours not tied up in avoidance.

Have seen a couple of neighbours who died rich but had little cash as they kept expanding and burying their profits to keep the government from getting it. They never got it either. Their widows had to farm for a number of years spending some of that money on hired help to spread the income over several years to avoid a big hit in that first year.

The government still got lots of their $ they just were not alive to see it happen.