US farm bill sets income ceiling on crop subsidies

WASHINGTON, May 15 (Reuters) - For the first time, there will be an income ceiling for participation in U.S. crop subsidies, barring the wealthiest Americans from the farm program, lawmakers said on Thursday.

But critics say the ceiling remains too high.

The income limit, part of the $289 billion farm bill sent to the White House, is set at $500,000 for off-farm income and $750,000 in farm income.

The White House proposed a much lower limit, of $200,000, or at most $500,000, for all subsidy recipients.

Critics contend the limits will hit few people. Rep. Ron Kind, Wisconsin Democrat, said it would be 0.2 percent of the 2 million U.S. farms.

"It wasn't everything we wanted but it is a significant step toward reform," said Sen. Amy Klobuchar, Minnesota Democrat, who proposed more stringent limits last year.

Sen. Charles Grassley, Iowa Republican, said he will try again for a "hard cap" on subsidy payments. He has suggested a limit around $250,000 a year per farmer. The limit now is $360,000 but there are ways to circumvent it.

Payment limits are a perennially divisive issue, pitting cotton and rice growers in the South against wheat, corn and soybean farmers in the Midwest and Plains states, and big operators against small farmers. Cotton and rice have the highest support rates but also high costs of production.

Here are descriptions of the limits proposed by the farm bill, the Bush administration proposal and current law.

Farm bill

--Bars people with more than $750,000 adjusted gross income from agriculture from receiving "direct" payments; still eligible for price supports and counter-cyclical payments.

--People with more than $500,000 AGI from off-farm source ineligible for all crop subsidies.

--Payment limit of $40,000 per person for direct payments and $65,000 in counter-cyclical payments. No limit on revenue from price supports.

--Spouses are eligible for subsidies so income ceiling and payment limits can be doubled.

--Requires payments to be tracked to an individual.

--Eliminates "three-entity rule" that allows growers to collect subsidies directly and through two affiliates.