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On Eve of Vote, Farm Bill Draws Threat of a Veto
GOP Fights Tighter Corporate Tax Rules

By Dan Morgan
Special to The Washington Post
Thursday, July 26, 2007

A huge multiyear farm bill ran into a White House veto threat and a sudden flurry of objections from Republicans yesterday on the eve of a vote on the House floor.

Farm-state Republicans had been lining up with Democrats to defend the bipartisan bill but changed course when notified that a proposed increase in nutrition programs would be funded partly by tightening the rules on U.S.-based foreign companies that avoid U.S. taxes by using offshore havens.

Republicans quickly picked up on a White House statement branding the funding plan as an unacceptable tax increase. Rep. Robert W. Good- latte (Va.), the ranking Republican on the House Agriculture Committee, said that all GOP lawmakers on the panel as well as GOP leaders would oppose the bill if the funding proposal stays in.

Democrats said the tax proposal would merely close a loophole that the Bush administration itself has decried in the past. "Who is surprised that the administration takes the side of CEOs who hold beachside board meetings at the expense of programs to feed the least fortunate here at home?" asked Rep. Lloyd Doggett (D-Tex.), a senior member of the Ways and Means Committee.

The furor added a new element to an increasingly heated debate over whether the bill would provide meaningful reforms to the sprawling farm-subsidy system.

House Speaker Nancy Pelosi (D-Calif.) has defended the legislation as an important step toward reform. In addition to paying for traditional farm programs, the bill would provide billions of dollars over the next decade for conservation, biofuel research and nutrition programs such as food stamps. There is new money for organic farmers, rural development and fruit-and-vegetable snacks for schoolchildren.

At a Capitol Hill rally Tuesday attended by dozens of farm-state lawmakers, lobbyists and representatives of advocacy groups, Agriculture Committee Chairman Collin C. Peterson (D-Minn.) said the bill "strikes the proper balance as it relates to reform." Goodlatte agreed that it would provide "real reform and a real safety net for farmers."

But the veto threat issued by the White House yesterday said that "more reform is needed" and that the bill "moves backward" in some areas. Still at issue is whether the legislation would have much impact in limiting the flow of federal farm payments to large commercial farmers, who received a substantial portion of the $19 billion in Agriculture Department payments in 2006.

The bill would end benefits to farmers with an adjusted gross income above $1 million, compared with the current limit of $2.5 million. Those with an income between $500,000 and $1 million could qualify if two-thirds of the income came from farming. The measure would also limit the use of interlocking corporate entities to maximize payments and would make it easier to trace federal farm payments to individual recipients.

But Peterson acknowledged that the proposed payment limit would save only $226.5 million in the first five years. "There's some feeling in this committee and this Congress that this doesn't go far enough," Rep. Earl Pomeroy (D-N.D.) said.

Yesterday, the USDA released a preliminary analysis of the House bill showing that only 3,175 farm owners and operators would be affected by the lowering of the income cap to $1 million. A proposed change in the fixed annual payment that the USDA makes to farmers based on their planting records could enable a husband and wife to receive $120,000 instead of the present limit of $80,000, USDA spokesman Larry Salathe said.

The limits would be cut further in an amendment to be offered by Rep. Ron Kind (D-Wis.). His amendment incorporates a number of administration proposals, including one aimed at ending a loophole that gives farmers unintended windfalls.

As it works now, the government guarantees a minimum price to farmers for their grain or cotton. When prices fall below that floor, farmers can file for a payment making up the shortfall. The subsidy, known as the "loan deficiency payment," or LDP, changes daily and farmers decide when to book it. When prices rise in the months after harvest -- as they generally do in corn markets of recent years -- farmers can keep the payment and still sell for more. "It's a double-dipping sort of thing," said Deputy Secretary of Agriculture Charles F. Conner. He added that the LDP provides farmers with "too much of a safety net."

In the fall of 2005, grain prices plunged temporarily because of a bumper corn harvest and transportation problems resulting from Hurricane Katrina. Thousands of farmers locked in huge LDP profits, storing their grain and selling it for much more later when prices recovered. Farmers pocketed an estimated $3.8 billion more than was needed to give them the guaranteed price.

The Bush administration has proposed a change that would allow farmers to collect the LDP the same day they sell their crop. This would "prevent multi-billion dollar pay-outs" that result from temporary price declines, yesterday's White House statement said.

But the change has been resisted by farm organizations and traders.

"This is a compromise, like everything else," Peterson said. "I would argue that [this bill] is the biggest change in payment limits ever. It's a matter of how far can we go and still pass a bill."

Morgan is a contract writer for the newspaper and a fellow with the German Marshall Fund, a nonpartisan public policy institution.

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