As we receive feedback and conduct additional research, we are refining the details of the proposal. This page describes some of the revenue and expenditure options that are under consideration. Note as a benchmark that eliminating all sales tax exemptions for pesticides and fertilizers would generate about $50 million per year. Also note that the options are not mutually exclusive; the final proposal, for example, may include continued exemptions for small family farms and for organic materials.
Revenue option #1: Eliminate the exemption except for small family farms. Combining information from the USDA National Commission on Small Farms and the USDA Economic Research Service, our basic definition of a small family farm is a farm that (1) has gross receipts of less than $250,000 per year; (2) has no hired manager, i.e., is managed by the farmer and/or farm family; and (3) is organized as a sole or family proprietorship, a partnership, or a family corporation. Farms that meet these criteria would continue to receive the tax exemption. According to the USDA National Agricultural Statistics Service (NASS), farms with gross receipts of less than $250,000 per year make up almost 90% of all farms in Washington State. Almost all of these are estimated to meet the entire “small family farm” definition and so would continue to receive the tax exemption.
Farms that do not meet these criteria (have sales of more than $250,000 per year, have hired managers, or are organized, e.g., as nonfamily corporations) would be required to pay sales tax on pesticides and fertilizers. According to NASS, farms with gross receipts in excess of $250,000 per year make up only 10.5% of farms but control 42% of Washington farmland. (Nationally, NASS figures show that farms that are not small family farms make up 8% of all farms but account for 68% of U.S. agricultural production.) Eliminating the tax exemption for these farms would generate approximately $20 million per year in revenue.
Revenue option #2: Eliminate the exemption except for organic pesticides and fertilizers. Organic is defined by the National Organic Program, but the basic dividing line is between synthetic materials and natural materials. Organic farms account for something like 2% of total farm output in Washington State, so the exemption for organic farms is unlikely to reduce the revenue estimate much below $50 million. Some organic materials, however, are probably used on conventional farms, so more research is needed to produce a revenue estimate for this option.
Revenue option #3: Eliminate the exemption for all pesticides and fertilizers. The Department of Revenue estimates that this would generate $50 million per year.
Other revenue options: These include exempting low-toxicity pesticides, exempting the first $x in chemical purchases for each farm, etc. If you have a good idea, send an email to us at firstname.lastname@example.org.
Expenditure option #1: Establish a commission of farmers and others to determine how to allocate the funds. Such a commission might include the following individuals and organizations:
This commission would be in charge of allocating funds to reduce pesticide and fertilizers use. Some of the possibilities are described in the options below.
Expenditure option #3: Establish a competitive grants program to fund participatory on-farm research and demonstration projects. For an example, see Missouri’s Sustainable Agriculture Grant Program.
Expenditure option #4: Provide loans or other support to farmers who are coverting to organic or adopting other environmentally friendly practices.
Expenditure option #5: Fund the Center for Sustaining Agriculture and Natural Resources at Washington State University.
Expenditure option #6: Establish a pesticide use reporting system. (Such a system could also be funded from pesticide registration fees charged by the Washington State Department of Agriculture.)
Other expenditure options: If you have a good idea, send an email to us at email@example.com.