Cash or Credit? Tax Credits and Conservation Outcomes

The use of tax policy to encourage conservation of agricultural and environmental resources is not a new idea but gained increased attention in the recently concluded farm bill debate. A new tax deduction is established for taxpayers who take voluntary measures to aid in the recovery of species that are either listed as threatened or endangered under the Endangered Species Act (ESA) or deemed by the Secretary of Interior or Commerce to be in need of protection under the ESA (“qualified species”). The farm bill also exempts retired and disabled individuals from self-employment taxes (the employer and employee shares of Social Security and Medicare taxes) on Conservation Reserve Program (CRP) payments. In addition, it extended for two years the special rule encouraging contributions of conservation easements. The Congressional Joint Tax Committee estimates that these three provisions, collectively, will reduce tax revenues by $1.366 billion over 2008 to 2017