Politico, May 1, 2008: Farm bill must clear income hurdle

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By: David Rogers

May 1, 2008 04:39 AM EST

Trying to close the books on a new farm bill, Congress and the White House are bumping up against the uncomfortable fact that President Bush twice last year vetoed health care bills for working families who earn far less than most farmers getting subsidies.

Income eligibility was a central issue in those veto fights as Bush opposed a bipartisan effort to expand the State Children۪s Health Insurance Program up the poverty ladder. By contrast, at a time of high commodity prices and food shortages, the government continues to distribute about $5.2 billion in annual direct payments to individuals regardless of personal income or current production on their farmland.

Mindful of the inequities, the White House is proposing to cut off subsidies to anyone with an adjusted gross income after deductions of $500,000 or more. House-Senate negotiators have moved toward this goal in the case of non-farmers, but a plan outlined Wednesday doesn۪t begin to phase out direct payments to active farmers until their adjusted gross incomes exceed $950,000.

Even then, the phaseout is so slow that a producer could have an income of almost $1.95 million before all direct payments would be cut off.

In comparison, last year۪s debate over health care for the children of working-class families revolved around much stricter income caps.

When Bush first vetoed an attempt to expand SCHIP in October, he charged Congress with extending coverage to families with incomes as high as $83,000. That claim was hotly disputed by many lawmakers. But the president then proceeded to veto a second bill that set a general cap of 300 percent of poverty.

A 300 percent cap would translate into about $51,510 for a family of three a single mother and two children, for example. In comparison, the $950,000 threshold lawmakers envision for the farm bill would be the equivalent of about 5,500 percent of poverty.

The irony weighs most heavily on Republicans who backed Bush on his vetoes but are now under pressure from commodity interests, especially in the South, to resist income caps on farmers.

In the Georgia Republican delegation, for example, Rep. Nathan Deal was one of those who pressed hardest for strict income caps on SCHIP; his colleague, Sen. Saxby Chambliss, the ranking Republican among Senate farm bill negotiators, has only reluctantly agreed to the farm income caps proposed Wednesday.

“I believe this farm bill is a skewed document that sends a signal that we are not really connected out there,” Virginia Rep. Eric Cantor, the chief deputy whip for House Republicans, told Politico. Cantor said he was speaking only for himself and not for the GOP leadership, but the juxtaposition with the SCHIP debate was uncomfortable. “It۪s a terrible message to send, and it۪s very inconsistent with health care,” Cantor said.

Farm bill advocates argue that the political focus on income caps distracts from other, more substantive reforms in the $300 billion-plus, five-year measure. Tougher direct attribution rules will make it easier to identify who gets subsidies in the future, and the bill makes it harder for large farmers to maximize their benefits by essentially subdividing their operations.

Direct payments would also be cut by about 2 percent over the first three years, a modest reduction but nonetheless a political breakthrough, given the resistance from commodity groups. Kansas wheat interests are mounting an effort to roll back this reduction Thursday.

But for the White House, the income limit has always been a signature issue in shaping a new farm bill, and the SCHIP history makes it harder for the president to back down.

In a statement late Wednesday, Chuck Conner, the deputy secretary of agriculture, said the House-Senate proposals “would result in continuation of farm subsidy payments to individuals with extremely high incomes.

“This is not reform and does not move Congress closer to a farm bill that the president would sign,” Conner said.

The administration argues that with only limited constraints on subsidy payments today, a substantial portion go to large, high-income producers. In 2005, commercial farms, defined as operations with sales of $250,000 or more, accounted for 9 percent of all farms but received 54 percent of all government payments, averaging $54,100 per farm.

These same farms, according to White House estimates, had average household incomes of $200,000. And the $500,000 ceiling now proposed by the administration is in fact a compromise from the president۪s original plan to cut off commodity subsidies to any farmer with an adjusted gross income above $200,000.

Those affected account for a relatively small group when considered as a percentage of U.S. taxpayers. Internal Revenue Service data for recent years suggests that almost 98 percent of all American tax filers have an AGI of less than $200,000; only 0.5 percent have an AGI of more than $500,000.

In making its proposal last year, the administration first looked at the approximately 2 million taxpayers who filed a Schedule F reporting a profit or loss from farming. Of this number, only 71,800, or 3.6 percent, reported an AGI of $200,000 or more. And the same group received a disproportionate 4.5 percent of all subsidies, including payments on land placed in conservation reserve.

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