Rising Farm Incomes Underscore Need for Subsidy Cuts

Chris Edwards

As Congress considers a farm bill in coming months, it should keep in mind that farm household incomes have risen greatly over the decades. When farm programs were put in place in the 1930s, the “per person disposable income of farms was 39% of U.S. per person disposable income,” reported agricultural economist Carl Zulauf. Farmers had lower incomes than other Americans.

Today, farmers have substantially higher incomes than other Americans, according to U.S. Department of Agriculture data. The chart shows the ratio of the average income of farm households to the average income of all U.S. households. Farm incomes fluctuate from year to year, but the long‐​term trend is upwards.

In 1960, farm households earned 65 percent of the incomes of all U.S. households, on average, but by 2021 they were earning 32 percent more. In 2021, the average income of farm households was $135,281, which compared to the average for all U.S. households of $102,316.

Farm subsidies in the 1930s were a low‐​income safety net, but that justification for subsidies has disappeared with today’s more prosperous farmers. For this reason and others, Congress should begin cutting the $20 billion or more in annual taxpayer support for farm businesses.

For farm households, the USDA data include income earned on and off the farm. The share of farm household income earned off the farm increased from less than 40 percent in the 1930s, to 53 percent by 1960, to 77 percent by 2021. Today’s greater diversification of income sources is a market‐​based way of mitigating the risks of farming without government subsidies.

These data are overall averages, but there are many different types of farm business. The USDA data show that smaller farm operators tend to earn a larger share of household income off the farm and are less likely to receive subsidies. Larger farm operators tend to earn a smaller share of household income off the farm and are more likely to receive subsidies.