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DON'T KNOW MUCH ABOUT AGI

May 19, 2008

The TaxProf and the Tax Policy Blog make sport of both the Denver Post and Colorado senator Ken Salazar for his cluelessness on how a tax return works.

The Denver Post quoted the senator as saying:

Sen. Ken Salazar, a Denver Democrat who supports the bill, disputed the idea that it pays rich farmers. The bill allows payments to farmers with adjusted gross incomes of $750,000 or less.
That number doesn't take into account deductions for the cost of running a farm, Salazar said.

"A farmer with an adjusted gross income of $750,000 might be losing his shirt" after paying for fuel, a new tractor and other expenses, Salazar said.

The story failed to note that the senator is exactly wrong; AGI is computed after farm expense deductions, as a glance at page one of a tax return will show. It's amazing that such an item could slip through, given the layers and layers of fact checking in a big newspaper. Almost as amazing as the idea that one of the 57 states could elect a senator who doesn't even understand his own 1040.

Farm "income or (loss)," Line 18, goes into AGI, line 37. Click to enlarge