111–120 of 391 posts
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This happens any time your only differentiator is price. The small guy is never going to be able to compete with a larger company on only price. Never make your differentiator "we're cheaper"! It's business 101.
Unless that’s a game you can win - see Amazon.
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I wonder how they see taxes as thrown away? Yes, government is inefficient. And corrupt. But you do need roads. And bridges. And law enforcement. And even military protection, even if it seems far away and remote from your farm.
One common feeling (i am from a farming community in Canada) is that tax revenue tends to get siphoned to urban areas. Politicians focus on bigger voting blocks, while rural communities (in their mind) pay for those promises.
The reality is that they may not know of the giant pothole on County Road 18 or the rampant littering in certain areas. It may not always work, but informing the local government of issues might get you what you want. After all, you are the constituent that gets those people into office. Let them help you.
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I agree with you that such a strategy is not optimal but it is not quite how you describe it to be. In the mind of the farmer: * $150,000 tractor: something that has value (not easy to calculate, but a $150k tractor has a value above zero, even if not brand new) and utility. * $30,000 to the IRS: money that I will never see again. Literally thrown away money. Option number 1 is very tempting.
I know people who do the same thing with charitable donations. They donate to an organization because they "need the tax deduction". Despite that they'd have more money in their pocket if they just didn't make the donation in the first place.
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I think if anything it can be traced to a fundamental misunderstanding about how fractions work (and less glibly, basic personal finance). Choosing to spend $150,000 on things you objectively do not need in order to not have to write a $30,000 check to the IRS and put $120,000 in the bank for next year is not a rational decision for all but the most extreme anti-government/anti-tax ideologies. It's the very definitio…
I agree with you that such a strategy is not optimal but it is not quite how you describe it to be. In the mind of the farmer: * $150,000 tractor: something that has value (not easy to calculate, but a $150k tractor has a value above zero, even if not brand new) and utility. * $30,000 to the IRS: money that I will never see again. Literally thrown away money. Option number 1 is very tempting.
See also: depreciation on a $150K tractor I didn’t need.
I have family that farms in Iowa and I also worked in the agriculture industry there for a while after leaving the military. One thing that increases the stress on the farmers is the way they avoid income taxes at all costs so they rarely save any of the profits from good years to help them float during the bad years. This is all anecdotal but I have personally talked with several farmers that would rather buy new eq…
Dumb question, as I am neither a farmer nor a businessperson, but is there a way for a farmer to set up, say, an LLC, which holds money from profitable years for use in unprofitable years, from which the farmer takes a steady salary each year?
This is all well and good, but now you've just shifted the profit to Profit LLC, and what to do with it there? If it's an LLC, whoever owns it has to pay income tax on it. So if you, the farmer, own Profit LLC, you're still paying taxes on it. If Farm LLC owns it, then the profit just goes back to Farm LLC, undoing the whole purpose.
So maybe you decide to make Profit LLC a C-Corp instead, so it's Profit, Inc., with the idea that now it's no longer a pass-through entity. But now you have to pay corporate income tax on it, even if you don't distribute it. Then, when you distribute it someday, you have to pay regular income tax on it again.
Some companies (such as Toys 'R Us) used to get around this by having "Profit LLC" be a company that owns the brand and licenses it to the retail company, to eliminate the retail company's profits. They then locate Profit LLC in a low/no-tax country such as the Cayman Islands. It's not clear how this would work for a farmer, however, because there's not really a brand to license, and any company that owned the land would still fall under US tax jurisdiction.
The same thing happens in Canada.
For some farms. I have relatives that are dairy farmers in Ontario and they seem to be doing ok. There's some kind of collective in place that establishes production quotas and you have to pay for the right to produce. Maybe more commodity products could benefit from this type of planning.
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I know people who do the same thing with charitable donations. They donate to an organization because they "need the tax deduction". Despite that they'd have more money in their pocket if they just didn't make the donation in the first place.
They might benefit indirectly from the donation in a way they couldn't by spending the money themselves, while also getting an income tax deduction.
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I agree with you that such a strategy is not optimal but it is not quite how you describe it to be. In the mind of the farmer: * $150,000 tractor: something that has value (not easy to calculate, but a $150k tractor has a value above zero, even if not brand new) and utility. * $30,000 to the IRS: money that I will never see again. Literally thrown away money. Option number 1 is very tempting.
money that I will never see again See also: depreciation on a $150K tractor I didn’t need.
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I wonder how they see taxes as thrown away? Yes, government is inefficient. And corrupt. But you do need roads. And bridges. And law enforcement. And even military protection, even if it seems far away and remote from your farm.
One common feeling (i am from a farming community in Canada) is that tax revenue tends to get siphoned to urban areas. Politicians focus on bigger voting blocks, while rural communities (in their mind) pay for those promises.
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> The farmers would talk about struggling, but have a brand new semi-tractor sitting in a barn unused 10 months out of the year. Your business having a illiquid depreciating asset that is required for the business to function can still be struggling. You can't eat a combine, you can't trade it away. This is usually solved with coops owning the equipment and time sharing it to distribute the costs among the coop parti…
I am not talking about a combine, I can understand the need for having your own combine during harvest. I am talking about a brand new fully optioned Peterbilt Semi-tractor, or buying a new pickup each year.
Now you can rent semis, but it isn't cheap. For a farmer the rental company will look at it as a semi that won't be rented for 10 months so they charge for it.