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FARM BILL, TAX BILL

May 09, 2008

Congress has finally reached agreement on just how badly to work over the rest of us to subsidize the ag industry. Tax Vox has a wonderful post about the pending farm bill. Some choice bits:

$451 million in tax breaks for timber companies. Ka-ching. $500 million for biodiesel. Ka-ching. $126 million for racehorse breeders. Ka-ching. $20 million for Aggie bonds. Ka-ching.

It is farm bill time, so grab your wallet. When it comes to agricultural subsidies, there are no deficit hawks. There are only farm-state lawmakers, for whom no subsidy is too great, and big city pols, who can only watch in envy.

Crop prices are low? We need subsidies! Crop prices are high? We need... subsidies!

Backers say the bill is fiscally responsible. They point to a small future cut in ethanol tax credits from 51 cents to 45 cents. Sounds good, although I have a funny feeling the credit won’t ever be reduced. Reductions in out-year tax cuts never seem to happen. Instead, they become yet another tax extender.

The other alleged nod to fiscal responsibility is an agreement to eliminate some subsidy payments to farmers who make more than $750,000, or $1.5 million per couple. Bush tried to cap the payments for those earning $200,000 or more. But that was a long time ago.

Eliminate "some" subsidies to farmers making over $1.5 million? Those farm budgeteers are just ruthless.

And never fear, there are plenty of winners. It appears that just one company, timber giant Weyerhaeuser, stands to gain $100 million a year in tax breaks. While Congress may trim subsidies for ethanol, it would add $537 million in tax breaks for biodiesel and renewable diesel And, having learned nothing from the ethanol debacle, it would create a “temporary” credit of $1.01 per gallon for biofuels made from farm waste, switch grass and the like.

Don't be surprised if the next step is a provision declaring that "farm waste" means "corn" and "soybeans."

The bill would create a special loss limit for farm losses -- apparently limiting even non-passive farm losses to the greater of $300,000 or net farm income "if the taxpayer receives Farm Bill commodity payments."

The President is pledging to veto the bill; whether the veto would stick is uncertain.

Tags: corporate welfare.tax policy.

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