With scant public notice, Gov. Rick Snyder signed legislation in June aimed at better management of Michigan forests. Embedded in the package of nine bills is a provision that adds one more benefit to state farmers, who already enjoy state tax breaks that exceed $300 million a year.
That sounds like a bargain when paired with Snyder administration assertions that agriculture and the food industry contribute $90 billion a year to the state economy, while stimulating employment of more than 900,000. That's more than a fifth of the state work force.
But other analysis pegs agriculture at closer to $3 billion, with a work force of about 70,000.
Do the returns justify the tax breaks? It may depend on which version of the story one believes.
“We have a very long history of various subsidies for agriculture,” said Michigan State University economist Charles Ballard. “I think the reason for that is partly economic but mostly political. For much of our history, we have had people leaving the farm. If you are a politician representing a rural district, you want to do something to slow down that process.”
Under the legislative package, farmers get an 18-mill tax exemption if their land is at least 50 percent agricultural and qualified forest land. Private property owners also get a tax break if they allow logging on their land.
That comes on top of other tax breaks to agriculture totaling nearly $330 million itemized in a 2012 budget document by the Department of Treasury.
According to the document, farmers are projected to enjoy about $250 million in sales tax exemptions in fiscal 2014 and $44.6 million in tax credits for preservation of agricultural land. It also foresees $34.3 million in property tax exemptions sparing farmers from reassessment of agricultural land at the time of a sale.
Qualified agricultural land has been entitled to an 18-mill exemption from local school taxes since 1994, when voters approved the tax reform measure known as Proposal A. As explained by the Michigan Tax Commission, it could include parcels classified as residential if more than 50 percent of it is used for agricultural purposes. It could also include an unimproved parcel classified as agricultural even if less than 50 percent is used for farming.
Farmers also get a break worth millions of dollars on fees they pay for farm vehicle license plates, compared to fees assessed on commercial trucks. They are eligible for state and federal disaster loans.
Federal subsidies add another layer to the cake. According to the Environmental Working Group, a Washington D.C.-based advocacy group, federal agricultural subsidies in Michigan totaled $4.87 billion from 1995 to 2012. That included $3 billion in commodity subsidies, $952 million in crop insurance subsidies, $536 million in conservation subsidies and $359 million in disaster subsidies.
It estimated that 10 percent of farms collected 71 percent of the subsidies, amounting to $2.8 billion over 18 years.
Advocates for agriculture assert the breaks are worth it, given the scope of the industry as outlined in a 2012 report by Michigan State University's Product Center, which promotes agriculture in Michigan. It's worth a closer look at figures often cited by the Snyder administration.
It found an overall economic impact for agriculture and food processing of $91.4 billion. The breakdown includes $29 billion in direct economic impact for the wholesale and retail food industry and $22 billion in “indirect and induced” impact. The analysis reported $7.2 billion in direct impact from farming and another $5.9 billion in indirect impact, plus $24.6 billion in direct and indirect impact from food processing and manufacturing. It listed overall employment – direct, indirect and induced – at 923,500. It calculated overall employment in agriculture at more than 100,000.
Federal data paint a different picture. According to the federal Bureau of Economic Analysis, Michigan agriculture including private crop and animal production, fishing, forestry and hunting generated inflation-adjusted GDP of $2.73 billion in 2010. That measures the total market value of all final goods and services produced. That was up $1 billion from 2000, but left the industry less than 1 percent of the state GDP.
Using the same metrics, it concluded the manufacturing sector generated $58.7 billion and the real estate sector $40 billion. It ranked arts and recreation sector in Michigan – which includes museums, performing arts and gambling — about equal to agriculture at $2.71 billion in 2010.
Of 16 non-governmental sectors tracked by the BEA, agriculture in Michigan ranked 14th in 2010. A 2011 Bridge analysis of federal jobs data found about 70,000 farmers, managers, and field workers directly employed in agriculture statewide.
MSU economist Ballard dismisses the Michigan Product Center report as more fiction than fact. Its chief flaw, Ballard asserted, is that it uses an overly broad economic measuring standard for agriculture and then compares it to data for other sectors that employed stricter standards. In other words: apples to oranges.
“It's not even remotely close to true. I understand the rhetorical value of it, but it is not true,” Ballard said.
“It's a slogan that I've heard for years and years – the number two industry in Michigan is agriculture. It's just rhetoric.”
A co-author of the report defended it as an all-encompassing assessment of the impact of food and agriculture in Michigan.
“We basically included everything,” said William Knudson, a product marketing economist with the Michigan Product Center.
For example, Knudson said, in calculating the economic impact of food retail and wholesale the analysis includes “food wholesalers, grocery stores, restaurants, cafeterias, the whole gamut.”
Knudson said the analysis also uses software to calculate indirect impacts on other areas of the economy, adding that to the total.
Bob Boehm, manager of commodities and marketing for the Michigan Farm Bureau, found no reason to doubt the analysis.
“We rely on those numbers. That's what we quote,” he said.
But beyond that, Boehm said it is undeniable that agriculture has an important place in Michigan's future.
“Agriculture is in every county in Michigan. We are No. 1 in blueberries and produce 75 percent of the tart cherry crop. As we look forward to feeding 9 billion people with the water supply we have here, it makes Michigan very well positioned for the future.”
Boehm maintained that tax policies favorable to agriculture – whether state or federal – are needed to preserve a way of life that contributes to the greater good.
“Most of our products are subject to the weather and supply and demand. With the risk involved and inability set the price, plus the general benefit to society in having an affordable food supply, it's in everybody's best interest.”
Economist Ballard noted that land cultivation in Michigan is about half what it was in 1920, dropping from 19 million acres then to about 10 million today. Through much of that time, agriculture has enjoyed a level of tax support other enterprises do not. In 2011, according to the Congressional Research Service, average U.S. farm household income was $87,278, about 25 percent higher than the average U.S. household income.
“Farm organizations have been very effective in making their case to the politicians,” he said.