A CHICKEN WAR is about to break out in the U.S. Senate. The feathers could hit the fan as early as today.
The issue is more tender than juicy. It involves the taxation of family farms. The tax law has traditionally allowed such entities to use an accounting method under which costs tend to show up faster than revenues. When an operation is growing there is almost always enough cost around to enable the operator to defer recognition of profit and, therefore, defer some taxes. The right to defer taxes is valuable, the equivalent of an interest-free loan.
Helping family farmers is not the worst thing in the world. They occupy, and perhaps deserve, a special place in our lore and politics. But there's a problem with this provision. Some family farms have become quite large and no longer deserve the special treatment.
In last year's cleansing of the tax code an effort was made to deny use of the magical accounting method to the largest family farmers. It failed, but this year it was revived in the name of deficit reduction. The reconciliation bill passed by the House last month as part of its $12 billion tax increase would limit use of the cash accounting method to family farms with gross receipts under $25 million. So would the bill from the Senate Finance Committee awaiting action on the Senate floor.
But in taxes there is always another layer. Yes, the larger farmers -- many of them chicken producers, including Perdue Farms of Maryland -- would have to use a more balanced accounting method in the future. But no, they wouldn't necessarily have to pay off their deferred taxes from the past. It's conceivable they'd never have to pay them, though for some the amounts are in excess of $100 million. The chairman of the House Ways and Means Committee, Dan Rostenkowski, even offered to let them stage the payments over several years. He was beaten in his own committee, 11 to 10, on the proxy of committee member and presidential hopeful Richard Gephardt. Some members of the Finance Committee also pressed for payment and were similarly rebuffed.
Now one of them, Bill Bradley, intends to offer a chicken amendment on the floor. The amount at stake is not as large as the principle, but the amount is not paltry, either. The Senate should crow aye.