The Southwestern Historical Quarterly, Volume 102, July 1998 - April, 1999 Page: 270
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Southwestern Historical Quarterly
Adjustment Act of the 193os, and the Soil Bank of the 195os-designed to
cut agricultural production, made farmers superfluous, left land idle, and
farms were available for non-farmers to purchase. Lastly, the income tax
code could be used to cover some of the expenses of farm or ranch life.3
While the income tax was looked upon primarily as an instrument of
revenue collection, it also could be used as a tool of economic stimula-
tion. For example, the re-introduction of the income tax in 1913 autho-
rized the mortgage deduction and certain provisions to deduct business
expenses. At various times specific provisions in the code were designed
to stimulate growth in certain industries. The oil depletion allowance
passed in 1926 permitted a 27.5 percent deduction on exploration and
development expenses. Similarly, agriculture had been a "tax favored"
industry since 1913. Although very few farmers paid income taxes until
after World War II, Congress allowed farmers to use some special features
when calculating their tax returns. For example, farmers could use cash
rather than accrual accounting. As they often had unsold products at the
end of the year they only paid tax on those products when they were actu-
ally sold-hence the term cash accounting. Farmers also could deduct
certain capital expenditures like soil and water conservation expenses
and the costs of raising livestock. Third, capital gains were calculated
more liberally in farming than in the non-farm sector, and livestock rais-
ers were able to take advantage of these provisions when they sold stock.'
Partly because of these tax advantages, agriculture attracted urban
investors, especially from the 1930s onward. Tax experts learned to use
the tax code to benefit their clients. While many bought land and farmed
or ranched, by the early 196o0s accountants became more innovative and
sought agricultural tax shelters in the form of orange groves, or cattle in
feedlots, to lower tax liabilities. Urban investors in land, livestock, or any
other agricultural operation could deduct farm or ranch losses against
other sources of income and lower their overall tax liabilities.
'For urbanites settling in the countryside after World War II, see A. C. Spectorsky, The
Exurbanites (Philadelphia: Lippincott, 1955), 14-111; and William H. Whyte, The Last Landscape
(Garden City, N.Y.: Doubleday, 1968), 23-25. For the effect of farm programs on the south, see
Gilbert C. Fite, Cotton Fields No More. Southern Agriculture, I865-98o (Lexington: University Press
of Kentucky), 195-205. For the impact of the income tax on agriculture, see Charles Davenport,
Michael D. Boehlje and David B. H. Martin, "The Effect of Tax Policy on American Agriculture,"
USDA Agricultural Economic Report 480 (1982), 6-8, 12-15.
'For the use of the income tax as a tool for economic stimulation and the utilization of tax
subsidies, see Ronald F. King, Money, Time and Politics: Investment Tax Subsadzes and American
Democracy (New Haven: Yale University Press, 1993), 115-118. For the oil depletion allowance,
see Eugene Neil Feingold, "The Internal Revenue Act of 1954: Policy and Politics" (Ph.D. diss.,
Princeton University, 1960), 38-40 and Davenport, Boehlje, and Martin, "The Effect of Tax
Policy on American Agriculture," 6-8.
5 Harold Oppenheimer, Cowboy Latzgaton- Cattle and the Income Tax (Danville, Ill.: Interstate
Publishers, 1968), 221-236.
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Texas State Historical Association. The Southwestern Historical Quarterly, Volume 102, July 1998 - April, 1999, periodical, 1999; Austin, Texas. (texashistory.unt.edu/ark:/67531/metapth101219/m1/327/: accessed April 19, 2018), University of North Texas Libraries, The Portal to Texas History, texashistory.unt.edu; crediting Texas State Historical Association.