Do Farmers Need Tax-Deferred Savings Accounts to Help Manage Income Risk?

Farmers' incomes vary with market conditions and yields. The Federal Agriculture Improvement and Reform Act of 1996 places more risk management responsibility on farmers. Savings accounts are one mechanism that could help farmers manage their income variability. Tax incentives have been proposed to encourage the use of such savings accounts, with benefits expected to accrue both to individual farmers and their communities. Participation rules tied to farm income may favor larger, more prosperous farmers. Because many farmers already save or use other methods to smooth household consumption, tax-advantaged accounts may largely substitute for existing risk management methods and offer limited additional overall benefits to the farm sector and rural areas.

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Agriculture Information Bulletin No. 724-07; Issues in Agricultural and Rural Finance

 Record created 2017-04-01, last modified 2020-10-28

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