Disaster Farm Fund Approved

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By Dan Morgan
Special to the Washington Post
Friday, October 5, 2007

Tapping savings resulting from tighter tax rules on business, the Senate Finance Committee yesterday approved the creation of a $5 billion fund that would compensate farmers hit by weather-related losses over the next five years.

The proposed Agricultural Disaster Trust Fund is part of a nearly $14 billion package of tax incentives for rural conservation programs, bioenergy development and young farmers, outside the existing farm subsidy program.

Sen. Kent Conrad (D-N.D.), who has led the fight for the disaster program, said that "an awful lot of people around this country are going to benefit." Echoing that, the committee chairman, Max Baucus (D-Mont.), said the fund would be a more efficient way to provide disaster aid than the current system of sporadic payouts in annual spending bills.

Senate Agriculture Committee Chairman Tom Harkin (D-Iowa), whose panel will draft a new five-year farm bill this month, has repeatedly questioned the wisdom of a disaster relief program. He favors the creation of a broad safety net that would provide help when a farmer's revenue falls below a state's norm.

The disaster program, Harkin said, is "a priority for three or four states, but not for the country."

In a study released this week, the Washington-based Environmental Working Group noted that most disaster aid goes to a few low-rainfall states, including the home states of Conrad and Baucus.

To offset the costs of the disaster and conservation provisions, the committee approved measures clamping down on tax-avoidance techniques used by businesses.

One provision would spell out in legislation a clearer definition of existing tax rules that require business transactions resulting in tax avoidance to demonstrate some "economic substance."

Sen. Charles E. Grassley (R-Iowa) hailed the committee's 13 to 8 vote in favor of that provision, saying it is time for Congress to clarify the law "so taxpayers know what the law is."

But R. Bruce Josten, executive vice president of the U.S. Chamber of Commerce, criticized the move, saying existing Internal Revenue Service rules are adequate. "What problem are we trying to solve?" he asked.

To offset the costs of new tax credits encouraging more rapid development of new biofuels, the committee approved a 5-cents-a-gallon reduction of the current 51-cents-a-gallon credit on ethanol blended by gasoline makers.

Morgan, a former Post reporter who specialized in agriculture, is a contract writer of the newspaper and a fellow with the German Marshall Fund, a nonpartisan public policy institution.


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