Grassley said funds could stay in the account for up to five years. Upon withdrawal, the money would be taxed as regular income. If the funds were not withdrawn after five years, they would be taxed as income and subject to an additional ten percent penalty. Essentially, farmers are given five-year windows to manage their money in a way that is best for their own operations. The 1996 freedom to farm bill took planting decisions out of the hands of the government and returned them to individual farmers.
Farmers now have the ability to plant according to the demands of the market.
Grassley said his bill helps farmers manage their income and smooth out the highs and lows of the commodity markets. Right now, when prices are high, farmers often pay so much of their income in taxes that they're unable to save anything. When prices drop again, farmers can face liquidity problems. This bill would give farmers a tool to accompany freedom to farm. Grassley is a member of the Senate Agriculture Committee and the tax-writing Finance Committee.