Regardless of your politics, there are some things either already in place or being contemplated by the new Congress and administration that directly bear on the beef business.
From the front lines, now that restaurants are opening up to 50 percent or full capacity, many restauranteurs are running into a major problem. Staff who have been off work for months or a year, especially young folks without families or major financial commitments, are not interested in returning to work. The extra federal $400/week on top of the state unemployment benefits means a lot of wait staff, kitchen help, etc. can still make more money staying home than working hard.
So they aren’t. While managing labor is always one of the toughest parts of managing a restaurant, managing none is even harder. Getting the foodservice portion of the beef business running again will be key to keeping beef demand high. Congress did not help. The live event business like concerts, festivals and fairs was shut down for most of a year.
Entrepreneurs in those businesses are finding that specialized people like roadies and technicians have moved on to other jobs, enjoying benefits and insurance. They’re reluctant to return. And think of the hot dogs, hamburgers and pizza that weren’t sold at baseball, football, or basketball games for a year.
Dozens of state attorneys general (AGs) are fighting back against federal takeovers of things like energy projects, election laws and state taxation. One group is suing the administration for killing the Keystone pipeline. The $1.9 trillion “COVID relief” law provided that states that took any of the $350 billion allocated for states and cities are prohibited from cutting taxes in their state. H.R. 1, For the People Act of 2021, should it pass, would also likely galvanize state AGs, as it would eliminate state election control.
You’re likely aware of the new Washington’s desire to spend lots of money and then figure how to get it from your pocket. One of the most disturbing set of plans has to do with agriculture’s ability to pass on their operations to heirs. There are two major factors. One is the step-up basis. The powers that be now want to eliminate that long-time tax rule, so that heirs cannot inherit assets from their parents at the current evaluation.
The proposals would capture all the appreciation that has occurred from the time your parents acquired an asset and their death, and tax heirs on those gains at applicable income tax rates, not capital gains rates. Many folks would pay for those gains at the top income tax rate, not even the higher capital gains tax rates also being planned.
The second factor is the exemption figure. At present, that is $11.7 million/person and double that per couple. There are bills already introduced that would cut the exemption to $1 million. The only good thing about that last figure, is that there could well be an uproar from many people in the coastal world whose homes alone would bust that cap, much less any small business or investment portfolio. Of course, people have to know. Congress shrank the inherited IRA window a couple years ago from a lifetime to 10 years and most of those affected never even heard about it.
The impact of such changes on agriculture and small business would be incalculable. Basically, several entire young generations would be disinherited. There would be no continuation of the family business or chance for them to start one with some ridiculously low exemption rate of $1 million or gargantuan tax bills on assets acquired 50 or 60 years ago.
There can be no reason for such measures besides destroying the wealth earned by past generations and taxed already and giving it to the government to redistribute. That is certainly not the American way.
There’s another thing these new young economists working for the new administration do not remember from the late ’70s and early ’80s. For a while then, the government needed to borrow so much money that it used up much of the liquidity in the markets. Businesses and regular people were paying 13 percent for mortgages and over 20 percent for business operating loans in order to compete with the government for money.
The world is different now, and there is more money in the system but no one had ever borrowed Trillions, with a T, in one budget year either. I’m no macro economist but I wonder if Uncle Sam can borrow all that money without heavily tapping funds from China, Russia, the Middle East, and maybe, Mars. — Steve Dittmer, WLJ columnist
(Steve Dittmer is the author of the Agribusiness Freedom Foundation newsletter. Views in the column do not necessarily represent the views or opinions ofWLJ or its editorial staff.)
