In a surprisingly move, Secretary of Agriculture Mike Johanns offered three reforms in his Jan. 31 farm bill proposal to fence rich farmers from the farm program payment trough.
Reforms. First, Johanns suggested that farmers – an ill-defined word at the U.S. Department of Agriculture and in Congress – with annual adjusted gross incomes of $200,000 or more be ineligible to receive farm program payments.
The current adjusted gross income line is a completely immaterial $2.5 million.
Second, Johanns proposed a hard cap in annual program payments of $360,000 and elimination of the “triple entity” rule, a paper shuffle that contains more payment holes than Swiss cheese.
And finally, Johanns wants to make it illegal to receive any farm program benefits on farmland newly acquired through Section 1031 of the U.S. Internal Revenue Code, a tax avoidance tool that has helped boost cropland prices nearly 80 percent since 1998.
Worthy. All these reforms are worthy of debate and, in some form, adoption because 10 years of Congressional tinkering to payment and tax code rules has made USDA the biggest sugar daddy this side of Halliburton.
Don’t expect any mainline farm group or most aggies in Congress to touch ’em, however.
Today’s larger payments, they will argue, are needed to support today’s larger farms. Besides, they add, Johanns’ reforms only save, maybe, $200 million per year.
Both arguments sound reasonable, but each slides past larger truths like large payments to large farmers also gives those farmers greater means to grow even larger and, in turn, garner even larger farm program benefits.
Taxpayer money. No farm group, politician or farmer should support a program payment scheme that has taxpayers financing farm asset consolidation and rural emigration.
And, too, that $200 million saved per year – it could be upwards of $500 million if tight payment caps are enacted and enforced – is farm bill money that could finance other chronically under-funded USDA programs like conservation and rural development.
Moreover, in the long run, good farm policy is good farm policy regardless of savings or costs. Good farm policy is also good rural policy; it’s good for rural neighbors, rural communities and a still-largely rural nation.
Most farm groups, however, don’t view Johanns’ modest (and in some cases, worsening) reforms as good, or neighborly, farm policy.
Hate it. For example, almost every farm group hates the secretary’s $200,000 adjusted gross income cap on program eligibility. All call it a “means test” whose sole goal is to kick big acreage farmers off the government gravy train.
Well, yes, it is a means test. The farm program, after all, is one of the few – if not only – federal entitlement programs that does not include a means test to ensure taxpayer assistance gets to people who actually need it.
The farm groups will argue that all farmers need program payments because the payments are “price supporting,” not “income supporting.” That’s true for some payments, false for others.
For example, the current limit on direct payments, money tied directly to “base” acreage rather than production, is $80,000. (Johanns wants it raised to $110,000.)
Laughable. Since these payments are made regardless of what – or even whether – the farmers produce, it’s laughable to describe them as “price supporting.”
Even more laughable is the icy reception Johanns’ payment reforms have received in Washington. Yes, his proposals are less than perfect. Yes, they are WTO-directed. Yes, most are short in the tooth.
But, golly, he’s opened the door and farm leaders should get off their hands and get to the threshold with their own ideas for hard payment caps, entity rules and limits to 1031-fueled benefits to reform today’s nearly indefensible mess.
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