If passed by the State Legislature, Assembly Bill 923 (AB 923) would repeal the "tractor tax" sale tax exemption that was voted into law only two years ago. The sales tax exemption currently on the books allows growers to purchase farm machinery, diesel fuel and other items without paying a sales or use tax.
The alarm bells should be screaming throughout our industry. If we allow the liberal Democrats to ramrod this legislation down our throats we will have lost a battle that gave California agriculture one very important step toward economic parity with other states, helped us cope with low prices and import competition ands gave us at least a ray of hope for the future of agriculture in this state.
But it’s not just about taking one step backwards. AB 923 would take the estimated $80 million in "savings" from the repealed sales tax exemptions and use it to help offset the cost of providing health insurance to farm workers.
Not so pretty
It’s not as pretty as it sounds. First of all, in order to qualify for a bit of compensation in the form of a tax credit, growers would have to come up with at least 75 percent of the premiums on qualified health care plans. That’s an economic impossibility for many small and medium sized agricultural operations, if not the larger ones. Secondly, the grower would have to actually make a profit to get the tax credit. So, not only would this bill take a very significant tax break away from those growers who need it most, it’s a double whammy in that it would give little, if any benefit back to most of those same growers.
Are you keeping track? That’s two steps backwards.
Now, here’s the third step in the wrong direction. AB 923 represents the worst of what’s wrong in Sacramento. In 2001, the sales tax exemption was the result of a deal made between the liberal Democrats and the rural Republican legislators. Before the agreement was made, there were not enough votes to pass the state budget, so the urban legislators offered an olive branch to their rural counterparts in the form of the "tractor tax" exemption. Without that concession the Democrats did not have enough votes to pass the 2001 state budget. Now they want to take it back without any regard to how much sense it makes, let alone what havoc it will wreak on an industry that is already on the verge of a full-blown economic crisis, in many commodities.
The sales tax exemption was passed into law in 2001 for very good reasons, and those reasons are still just as valid today as they were then. Other states that compete with California for a share of food and fiber sales do not tax their farm equipment sales. Doing so in California would place a tremendously unfair burden on our growers. Additionally, we’ve seen our markets eroded by cheap imports from other countries and suffered tremendous economic difficulties as a result. Reinstating the "tractor tax" would only further hinder our ability to compete for world markets in the future.
This ongoing debacle in Sacramento should be a sobering wake-up call to everyone involved in California agriculture. Although farm organizations’ opposition has closed the progress of AB 923, it is being pushed by Ritchie Ross, a campaign adviser to many Democratic legislators, and a supporter of the United Farm Workers Union. He brought forward last year’s mandatory arbitration for farm labor union contract negotiations, and likely has a whole storehouse full of ideas like that and AB 923 just waiting in the wings to foist upon agriculture.
If we allow our legislators, particularly farm area Democrats, to continue to ignore the critical needs of our industry and renege on past promises, we’ll be doing more than taking a few steps backwards -- we’ll be packing our bags along with our tractors and heading for the state border where things may not be perfect, but at least they’re competitive.
Don Dressler is agricultural issues and insurance consultant to the California and Arizona produce industry.