How much is enough?

No easy answers in payment limit debate

By Sara Wyant

When Agriculture Secretary Mike Johanns rolled out the Administration's farm bill proposal at recent House and Senate Agriculture Committee hearings, it was greeted with an interesting mix of kudos and criticisms. Perhaps most surprising was the fact that lawmakers didn't automatically discard the ideas--instead they offered a willingness to consider many of them. Even the House Agriculture Committee's top Democrat, Chairman Collin Peterson, D-MN, described the Bush administration's farm bill proposal as better than he expected.

But one issue continues to generate a great deal of heartburn and debate, even among several members of Secretary Johanns' own party and major farm and commodity organizations: tighter payment limits. Love 'em or hate 'em, individual farm program payments, first published by Ken Cook's Environmental Working Group and now available online, are likely to be in the spotlight once again as part of the 2007 farm bill debate.

Based on tax filings

The USDA proposal would move away from the current system under which an individual can qualify as part of three separate entities to capture farm program payments. Instead, the new structure would only allow farmers with Adjusted Gross Incomes (AGI) under $200,000 to still receive farm program payments. If this plan were to be adopted, USDA estimates that about 85,000 of the approximately two million taxpayers who file a Schedule F form with the Internal Revenue Service would be disqualified.

"I believe it's a wise federal policy to invest in agriculture," noted Secretary Johanns during the Senate Agriculture Committee hearing. "But is there a point where you become successful enough where you graduate from the subsidy?"

USDA maintains that this proposal would only eliminate the "richest of the rich," who likely don't need subsidies. "By any definition in any part of the country, these folks are doing very well," added Johanns

Too low?

Yet southerners, like Sen. Blanche Lincoln, D-AR, complained that the $200,000 level would drive farmers out of business and push production overseas. Sen. Saxby Chambliss, R-GA, argued that $200,000 would be too low and negatively impact farmers' abilities to make all of their input and equipment purchases.

Of course, anyone who has ever filed a schedule F understands that farmers can deduct the purchase of inputs, equipment , wages, mortgage interest and countless other expenses from gross income amounts before the adjusted gross income is even calculated. And you can even carryover losses from prior years, if applicable. In reality, filers with an AGI of under $200,000 could have a gross income equal to multiples of that amount.

The ability to make deductions on the Schedule F form is one reason why Chuck Hassebrook with the Center for Rural Affairs in Walthill, Neb. doesn't like this new "means test" proposal. "The problem with the $200,000 AGI proposal is that it would encourage people to expand and increase deductions, thus encouraging expansion," he recently told the Senate Agriculture Committee.

Senator Chuck Grassley, R-IA, has long championed tightening payment limits, based on the system that USDA currently uses, but has yet to be successful. With USDA's additional focus on this issue, he hopes that this may finally be the year that some type of changes are made.

Editor's note: Columnist Sara Wyant is president of Agri-Pulse Communications, Inc. and publishes a bi-weekly newsletter, Agri-Pulse, on food and farm policy. For more information, you can e-mail her at Agripulse@aol.com.

B

5

2/19/07

1 Star WK

Date: 2/15/07

	Web hpj.com

Copyright/Privacy
Copyright 1995-2009.  High Plains Publishers, Inc.  All rights reserved.  Any republishing of these pages, including electronic reproduction of the editorial archives or classified advertising, is strictly prohibited. If you have questions or comments you can reach us at High Plains Journal 1500 E. Wyatt Earp Blvd., P.O. Box 760, Dodge City, KS 67801 or call 1-800-452-7171. Email: webmaster@hpj.com