The Rural Voice, 1985-12, Page 10research that may make a difference
is a detailed report on current farm
finances, commissioned by the On-
tario Agricultural Advisory Council.
This report will be used by council
members in assessing government
agricultural policies. Although
Brinkman's previous farm income
study, in which he included capital
appreciation of farm assets in com-
paring farm and non-farm incomes,
generated a good deal of criticism,
the economist has used the same
methodology in his latest research.
This time, using statistics from the
1980s, his study documents reduced
farm incomes in Ontario along with a
very large capital depreciation.
"It is extremely important to
measure changes in asset values, even
if some farmers want to ignore them,
because they represent the collateral
on farms that farmers must have to
be able to keep their loans. The bot-
tom line is that banks will count the
capital depreciation whether the
farmer wants to or not...." says
Brinkman. By documenting farm
asset values "both when they go up
and when they go down," the
economist says he hopes the public
can better understand the problems
facing farmers now (rather than dur-
ing the more prosperous 1970s). The
more information researchers can
provide, the more the general public
can be educated about the situation
facing farmers, Brinkman says.
But he cautions that researchers
like himself must often wear two
hats. While they study policies that
might provide an immediate bailout
for individual farmers experiencing
financial problems, they also have to
consider how government policies
will affect the industry as a whole,
over the longer term. This means,
Brinkman notes, that "sometimes we
will have to take positions unpopular
with some people."
"You don't give up easy in this
business, you keep at it all the time,"
he says.
While his study of Canadian farm
incomes has proved Brinkman's most
unpopular research to date, the
economist has also ruffled some
feathers with his recommendation
concerning Section 31 of the Cana-
dian tax law.
tion and still make money after taxes,
deferring income by increasing inven-
tories from year to year.
"If I'm a full-time farmer, is that
fair competition?" asks Brinkman,
noting that most of the discussion in
Canada has been from the part-time
farmers' point of view.
"Furthermore, some part-time
farmers may not realize what they'd
be getting into. Right now farmers
must meet the expectations of profit
rule to be able to deduct any farm
losses. Many of the part-time farmers
likely couldn't meet that rule if it was
The secret of getting into farming in the '80s is,
"Don't enter when you are ready, enter when the time
is right."
Section 31 is the provision that
allows part-time farmers to deduct
only $5,000 out of their first $7,500 in
losses against their non-farm income.
There's been increased pressure from
part-time farmers, including some
government bureaucrats who own
farms, to have this restriction
eliminated, Brinkman notes.
"There's no question this would
help most part-time farmers, but it
could also hurt full-time farmers,
especially livestock producers," he
says, pointing to the American situa-
tion. In the States, where unlimited
write-offs are allowed, high income
non -farmers have developed syn-
dicates to invest in large livestock
feedlots, in direct competition with
full-time farmers. Because of the tax
laws, they can lose money in produc-
rigorously enforced but they slip by
now because it's not worth going
after all of the small operators (with
less than $5,000 in losses). If you
allow unlimited write-offs, the only
control on the system will be the ex-
pectation of profit rule. This will like-
ly mean that Revenue Canada will
have to enforce this rule very careful-
ly and many of the people who now
get by will likely get caught and could
have their back taxes assessed."
Brinkman had expected Section 31
to be eliminated in Finance Minister
Michael Wilson's budget last spring.
He was pleasantly surprised when the
rule governing part-time farmers was
left untouched.
Another unpleasant message
Brinkman and his fellow university
professors have found themselves
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Wishing
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a Happy
and
Prosperous
1986
Best wishes from
Thames Bend Farms & Staff