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.

--In optional Average Crop Revenue Election program, maximum direct payment is $32,000 and counter-cyclical is $73,000. No limit on revenue from price supports.

--Enrollment in land stewardship programs denied to people with more than $1 million AGI unless more than two-thirds is from agriculture. Waivers allowed for projects of special environmental significance.

--Among stewardship programs, producers can receive up to $300,000 over six years in the cost-share Environmental Quality Incentives Program to control runoff, waivers allow up to $450,000 for projects of special value; up to $200,000 over five years in the "green payment" Conservation Stewardship Program; and $50,000 a year for idling fragile land in the Conservation Reserve.

Estimated savings of $620 million over 10 years.

Bush administration proposal

--Deny commodity subsidies to people with AGI above $200,000 a year; keep the current $2.5 million a year AGI limit for access to land stewardship programs.

--Attribute payments to individuals.

--End the three-entity rule.

--Mandate tighter rules on who is "actively engaged" in farming, and thus eligible for subsidies, if they do not provide labor. Landowners who take a share of the crop as rent remain eligible for subsidies.

--Include dairy, peanut, honey, wool and mohair payments into the de facto $360,000 a year limit rather than allowing separate counting of them.

--Estimated savings $1.45 billion over 10 years.

Current law

--People with up to $2.5 million AGI are eligible for crop subsidies and land stewardship programs. No income limit if more than 75 percent of the income is from agriculture.

--Growers can receive crop subsidies directly and through two affiliated businesses, the "three-entity" rule.

--Payment limit of $180,000 a year can be doubled, to $360,000, by three-entity rule and spouse allowance. Limit is $40,000 in direct payments, $65,000 in counter-cyclical payments and $75,000 in price supports. Commodity certificates can circumvent the limit on price supports.

--Among stewardship programs, producers can receive up to $450,000 through EQIP, up to $45,000 a year through CSP and up to $50,000 a year for the Conservation Reserve. (Reporting by Charles Abbott; Editing by David Gregorio)