APB agenda 081804 - Laserfiche WebLink

Browse Search

,l Center for Rural Affairs, www.cfra.org Individual Development Accounts are public or privately matched small savings accounts that can only be used for home ownership, small business development, or higher education. They help people build long- term economic well -being by building assets through home ownership, business ownership, or enhanced education. Asset building provides important psychological and social effects that cannot be achieved by simply increasing income. It gives people a stake in their community and encourages them to take responsi- bility for its future. States that appropriate funds for individual development accounts for low and moderate - income people can gain federal matching funds. Tax Incentives for Rural Development States can also shape their tax policy to foster the small entrepreneurial approaches that work in rural com- munities. Few existing businesses tax incentives are designed for the small start-up operations. That could be changed. States could provide an investment tax credit for starting or expanding owner - operated businesses with five or fewer employees. That concept is embodied in proposed federal legislation — the New Homestead Opportunity Act introduced by Senators Byron Dorgan (D -ND) and Chuck Hagel (R -NE). It would provide a tax credit equal to 30 per- cent of the money invested by an individual in starting or expanding their own small business. The maximum tax savings would be limited to $25,000 over five years. The Act has not passed. This approach could be adopted by states. Property tax relief can be designed to strengthen small and medium -size farms and ranches and thereby open opportunity to more beginners. For example, states could provide income tax credits when property taxes on owner - operated farmland take an excessive share of the operator's income. By limiting the relief to a modest amount of land, such a provision could target relief to smaller and beginning farmers and help them compete for land with larger operations. Maintaining small and mid -size fanns and increasing the number of beginners is rural development. Such an "owner- operator tax credit" could be combined with a similar tax credit for modest income home- owners — both rural and urban. That might give it the votes to pass in legislatures that rarely have the rural votes to pass property tax relief targeted only to farmers and ranchers. Tax credits can also provide incentives for landowners to rent land to beginning farmers. The Nebraska Leg- islature created a program to provide a tax credit to landowners who rent land to beginners for a share of the crop. Share rents substantially reduce the capital requirements of getting started, and they provide a means for the landlord to share some of the risk of falling prices and crop failure. The tax credit can offset the risk that a landowner assumes in share renting land to a beginner. Such incentives can be broadened beyond farming and ranching to also encourage innovative and favorable leases of existing non -farm businesses to new operators. Many rural business people are nearing retirement. Incentives for them to transfer their businesses to a new generation could make a critical difference in deter- mining whether businesses are shut down and their assets sold, or new families are offered the opportunity to start businesses and lives in rural communities. Page 21