WASHINGTON (Reuters) - Thanks to a White House veto threat, Congress is on the path to an overall tightening of farm subsidy rules, said a staunch Senate advocate of payment limit reform on Tuesday.
Sen. Charles Grassley said he believed Congress would close loopholes that allow excessive payments and may lower the ceiling on payments per farm, now set at $360,000 a year, as part of an overhaul of U.S. farm law.
Those steps go beyond the White House goal of no subsidies to the top 2 percent of Americans. The White House says it will veto the farm bill if it raises taxes or allows payments to people with an adjusted gross income over $200,000.
"If we didn't have the White House threat of a veto, we couldn't do anything," Grassley, an Iowa Republican, said at the Reuters Regulation Summit. Instead, he said, "We're going to beef up what's in the House and Senate bills."
Grassley is one of nine Senate negotiators who will work with the House on a final version of the farm bill. There are several key disputes between the chambers, including subsidy rules, which have become the premiere test of farm law reform.
The House and Senate agreed in their bills to three reforms -- tracking payments to individuals, no longer allowing farmers to collect payments directly and through two affiliated operations and abolishing "commodity certificates" that can be used to evade the $360,000 limit.
The bills also revise payment limits but did not reduce them to the $250,000 "hard" cap proposed by Grassley and do not go as far as the administration to exclude high-income people from the farm program.
A lower payment limit is needed, said Grassley, and there should be a tighter definition of who is a farmer. At present, anyone who provides land, capital, equipment, labor or management qualifies for farm supports. Grassley and North Dakota Democrat Byron Dorgan say 1,000 hours a year of labor or management should be required for eligibility.
Senators voted 56-43 in December for the $250,000 cap and other reforms proposed by Grassley and Dorgan but their package was not included in the Senate farm bill.
Earlier on Tuesday, Grassley sent a letter to the leaders of the House and Senate Agriculture committees, saying more reform was needed on payment limits.
He said landlords could evade income tests, such as the administration's $200,000 cut-off, by renting their land for cash, rather than for a share of the crop, by reorganizing operations to spread payments among more recipients or manipulating their income, such as buying land.
"No one on the conference committee should suffer under any illusions that taking action on an AGI (adjusted gross income) limit is, by itself, doing anything significant for payment reform," said the Sustainable Agriculture Coalition, a small-farm advocacy group. It said "real reform" also meant closing of loopholes.
If Congress decides to use an AGI limit, said the group, "it should apply to the land, such that if either the landlord or the producer exceeds the cap, the land becomes ineligible for direct payments or at the very least becomes ineligible for half the payment."
Southerners say their region would be hit unfairly hard by lower payment limits. Cotton and rice have high support rates but also high production costs, they said.
(For summit blog: summitnotebook.reuters.com/)
(Reporting by Charles Abbott; Editing by Tim Dobbyn)
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