ABSTRACT
The policies embodied in federal farm programs are often viewed as a major source of federal government influence on the structure of U.S. agriculture (Tweeten, chapter 13, this volume). Monetary and fiscal policy may also have had important effects on the size and number of firms in the farm sector and the degree of capitalization within each farm (see, for example, Chambers and Just 1982; Hausser et al. 1986). This chapter examines the potential implications of tax policy for the U.S. agricultural sector. Historically, the U.S. tax code has included many incentives that attempt to stimulate investment by lowering the effective cost of capital. These incentives include tax credits, accelerated depreciation, and special treatment of capital gains. If the relative cost of labor, capital, and land inputs is altered by such provisions, the levels and mixes of labor, capital, and land involved in U.S. agriculture are also likely to be affected. However, the effects of other tax provisions as well as market adjustments in asset prices and interest rates often (at least partially) offset the ability of tax policies to reduce the relative costs of capital equipment
