Recall that yesterday’s FarmPolicy update indicated that, “Farm-state Republicans had been lining up with Democrats to defend the bipartisan bill but changed course when notified that a proposed increase in nutrition programs would be funded partly by tightening the rules on U.S.-based foreign companies that avoid U.S. taxes by using offshore havens” (Dan Morgan. “On Eve of Vote, Farm Bill Draws Threat of a Veto.” The Washington Post. 7.26).
Likewise, DTN Political Correspondent Jerry Hagstrom and DTN Staff Reporter Chris Clayton DTN noted on Wednesday (link requires subscription) that, “The Bush administration threatened Wednesday to veto the 2007 farm bill, in part, over Democrats’ plans to pay for a $4 billion increase in the food-stamp program over five years through a tax measure Democrats said was closing a loophole, but Republicans argued was a tax increase.”
In a separate DTN article from yesterday, Jerry Hagstrom noted that, “Democrats late Wednesday vigorously defended a decision to use a tax measure as an offset for a $4 billion increase in food stamps in the farm bill scheduled to go to the floor Thursday, even though it would cost Republican votes on the overall bill.
“The measure would tax royalties, interest and other payments U.S. foreign-owned companies make to foreign affiliates. The companies do not pay the taxes due to tax treaties, but Rep. Lloyd Doggett, D-Texas, who introduced the amendment to require payment of the taxes, said they are a ‘loophole.’
“House Agriculture Committee ranking member Bob Goodlatte, R-Va., called the provision a tax increase and said Republican committee members and House leaders would not vote for the farm bill if it remains.”
The tax provision, which was not part of the farm legislation passed by the House Ag Committee, had to be approved for inclusion for floor debate consideration by the Rules Committee.
Congressional Quarterly reported yesterday that, “In an early morning session, the Rules Committee approved a framework for debate that allows consideration of 31 amendments and links a $4 billion tax measure and series of energy fees to the legislation.”
Brownfield’s Tom Steever reported yesterday that, “The U.S. Ag Secretary says it’s a tax increase that has soured him on the House Ag Committee’s farm bill.”
Mr. Steever added that, “Johanns says this kind of politics is not normal for farm bill debate. Typically partisan politics are set aside in agriculture and we just work on commodity issues and regional issues and that sort of thing,’ says Johanns, ‘but I must admit I’m worried about what they’re motives are here.’”
In a press briefing yesterday, House Minority Leader, Rep. John A. Boehner (R-Ohio) stated that, “They’re looking at increasing taxes to pay for their farm bill. And instead of cutting the alternative minimum tax, they’re looking to additional tax increases.”
At the same briefing, House Minority Whip, Rep. Roy Blunt (R-Missouri) stated that, “We’ve seen that happen over on the House side this week, where what could have been a huge bipartisan vote for the farm bill has turned into a needless fight over taxes.”
However, House Ag Committee Chairman Collin Peterson (D-Minnesota) indicated earlier this week that, “Apparently, the Bush Administration and some in the Republican leadership care more about defending the ability of foreign companies to exploit a loophole in the U.S. tax system than they do about supporting the hardworking families and farmers in this country. I hope that they will reconsider their opposition and join us in supporting this Farm Bill that represents a new direction for agriculture policy.”
David Rogers, writing in today’s Wall Street Journal, provided a more detailed assessment of the tax provision and noted in part that, “Treasury Secretary Henry Paulson weighed in, warning that the provision would disrupt investment in the U.S. and override tax treaties with trading partners. And a powerful array of business lobbies joined the procedural fight to block the entire farm bill from moving ahead with the tax portion intact.
“At issue are what rules determine withholding rates on earnings by the U.S. units of foreign corporations. In general, companies are subject to a gross basis U.S. tax at a 30% rate, but tax treaties often reduce or eliminate withholding taxes imposed by the U.S. The United Kingdom and many European partners have zero-percent rates, for example, while Japan has negotiated a 10% rate and India a 15% rate, according to Treasury.
“Rep. Lloyd Doggett (D., Texas), who helped craft the provision, said companies can exploit the treaty system by funneling their U.S. earnings through a financial unit in a treaty country, such as the U.K. or Netherlands, while the real headquarters is a Caribbean tax haven without a tax-treaty agreement with the U.S.”
Congressional Quarterly writer Catharine Richert reported last night that, “The partisan split erupted over a proposal by Ways and Means Committee member Lloyd Doggett, D-Texas, to raise $7.8 billion over 10 years by ending a practice known as ‘earnings stripping,’ which lets foreign-owned companies shift income to a country with lower tax rates. The proposal was designed to raise more money for food stamps without breaking pay-as-you-go rules that require offsets for new spending.
“Business groups mutinied, complaining that the plan would discourage foreign companies from operating in the United States and would unfairly affect legitimate transactions not designed to avoid taxes. The White House issued a veto threat, and Republicans lined up in opposition, complaining that Democrats had reneged on a pledge not to raise taxes in the bill.”
Ms. Richert added that, “But during floor debate on the rule, Democrats showed little concern about bipartisan support and seemed to enjoy forcing Republicans to oppose a bill popular in the politically competitive farm belt.
“‘They’d rather protect the tax cheaters in Bermuda than help the farmers in this country,’ said Earl Pomeroy, D-N.D., who has been Peterson’s right-hand man in drumming up support for the bill.”
In the end, the “House voted, 222-202, to approve the rule for floor debate on the bill,” the CQ article said.
The partisan back-and-forth over the tax provision appeared to raise questions about the following paragraph that appeared in a USA Today article from earlier this week, “[P]eterson will join forces with rural state lawmakers from both parties as he pushes a controversial $286 billion farm bill. Once again, it’s a fight along philosophical and regional lines that has little to do with party affiliation.”
Interestingly, Jonathan E. Kaplan and Jackie Kucinich noted in an article posted at The Hill this morning that, “[Rep. Ron Kind (D-Wisconsin)] told Democrats at a Thursday morning caucus meeting that the tax increase would not be needed if the bill included ‘serious’ reform.”
Kind Amendment / Political Considerations
Dan Morgan reported in this morning’s Washington Post that, “Farm state lawmakers, allied with House Democratic leaders, last night easily defeated a proposal for a major overhaul of traditional farm programs that would have pared subsidies to big growers and spread benefits more broadly.
“The 309 to 117 vote came on the first day of debate on a multiyear farm bill that was heading for final action today.”
Mr. Morgan indicated that, “The amendment was billed as this year’s major challenge to an entrenched farm-subsidy system. The defeat was a setback for a coalition of environmental organizations, anti-hunger groups and religious leaders who favor shifting more funds to conservation, nutrition and other priorities while creating a more level playing field in world markets for unsubsidized poor farmers abroad.”
The Post article also noted that, “Kind’s vision in recent months came into conflict with the pragmatic politics of Democratic leaders seeking to rebuild the party’s rural-urban bonds. House Speaker Nancy Pelosi (D-Calif.) urged Democrats to support the farm bill.
“Recalling that a similar Kind amendment garnered 200 votes in 2001, the Agriculture Committee loaded the bill with billions of dollars for nutrition programs, conservation, black farmers, and the Florida and California fruit and vegetable industries, in an effort to attract broad support. As late as 1 a.m. yesterday, Democratic leaders were adding money for nutrition programs.
“About $840 million in mandatory spending was added for the McGovern-Dole food aid program, after nearly $1 billion was shifted out of government payments to private crop insurance companies to offset the cost.
“The new funding was sought by Rep. Jim McGovern (D-Mass.), a key member of the House Rules Committee. McGovern said it was ‘a good thing’ that the crop insurance industry would be contributing to feeding hungry children abroad.
“The program is named for two former senators, not for the congressman.”
DTN writer Chris Clayton noted last night (link requires subscription) that, “Kind’s bill was adamantly opposed by commodity groups who hired lobbyists, bought ads and blanketed lawmakers with criticisms of the measure. The push by farm groups helped the proposal receive 84 fewer votes than Kind got for a similar proposal in 2002.
“Lawmakers opposed to the Kind amendment argued it would wreck the safety net for producers.
“‘This amendment shatters the farm safety net,’ said Rep. Bob Goodlatte, R-Va., ranking member of the House Agriculture Committee.
[Rep. Jeff Flake (R-Arizona)] told fellow lawmakers it did not make sense to keep sending direct payments to producers nearly 12 years after the payments were created as a way to phase out programs. The new farm bill will pay $5.1 billion per year in direct payments.
“‘Direct payments were never meant as a safety net,’ Flake said. ‘They were meant to wean farmers off the dole.’
“It was a major setback for people wanting to see tighter payment limits in the farm bill than those offered by the House Agriculture Committee version. No other amendments in the farm bill would change the payment proposals in the House.”
Dow Jones writer Bill Tomson reported last night that, “The underlying 2007 farm bill, which Kind-Flake legislation sought to amend, was approved unanimously last week by the House Agriculture Committee. It seeks to exclude only farmers with an adjusted gross income of over $1 million.
“Debate over the 2007 farm bill, a five-year blueprint for agriculture policy, began late in the day Thursday. It is expected to be voted on Friday.”
Associated Press writer Julie Hirschfeld Davis, in a report filed yesterday, flushed out more detail on the political wrangling surrounding the Farm Bill debate; “Farm-state GOP lawmakers, once strong supporters of the bill, staged a revolt Wednesday against tax increases included to partially fund $4 billion worth of food stamp and other nutrition programs. That left Democrats shopping for more votes in their own party, especially among urban and suburban lawmakers.
“They won over Rep. Jim McGovern, D-Mass., with the promise of more funding for an international food aid program. Money to settle USDA racial discrimination claims from the 1990s was offered up to cement support among members of the Congressional Black Caucus.
“House Speaker Nancy Pelosi, D-Calif., ‘had to knock some heads together’ to scrounge up enough Democratic support, said Agriculture Committee Chairman Collin Peterson, D-Minn.”
The AP article added that, “Pelosi already was walking a fine line on the measure, struggling to balance her desire to protect farm-state freshman Democrats who had a strong stake in traditional farm programs with her party’s promises to include substantial reforms.”
Congressional Quarterly writers Catharine Richert and Kathleen Hunter noted yesterday that, “Peterson also worked to stave off a last-minute revolt by Congressional Black Caucus (CBC) members by dedicating $1 million in extra funding for historically black universities and for black farmers. Several senior CBC members said they were concerned that the language for both provisions had been eliminated…[P]eterson also helped broker a deal late Wednesday night on new labeling for fruits and vegetables. Under the bill, produce will be labeled to indicate where it came from, similar to plan for meat that was included in the committee bill last week.”
The CQ article also indicated that, “House Democrats are almost daring Republicans to vote against the farm bill, saying GOP members from rural districts would have trouble justifying a vote against the legislation back home.
“‘The whole middle of the country might be blue before it’s done,’ said Collin C. Peterson, D-Minn., chairman of the Agriculture Committee.”
Des Moines Register writer Philip Brasher also provided more detail with respect to Farm Bill funding issues in an update posted yesterday at the Cash Crops Blog.
There, Mr. Brasher stated that, “Debate finally started on the House farm bill Thursday evening, and Democrats showed they have the votes to muscle it through the floor after a night of horse-trading.
“In the process, though, they demonstrated how tenuous the bill’s funding is.
“Democrats needed the $7.5 billion in taxes from foreign companies to fund food stamps and $2.5 billion from oil companies to pay bioenergy development.
“And to get the final votes for the bill, Democrats had to cut the crop insurance program by another $1 billion to pay for a boost in international food aid. That cut will come from insurers and agents, who have some powerful friends in the Senate.
“Senator Grassley, is your phone ringing?
“And oh yes, the House also used Sen. Tom Harkin’s Conservation Security Program as a piggy bank, taking $4.8 billion to pay from it for conservation programs that have broader support in the House.”
In an article from yesterday’s Des Moines Register, Mr. Brasher stated that, “Sen. Tom Harkin slammed House Democrats on Thursday for slashing $4.8 billion from a farm conservation program that he authored.
“‘They knew it was a high priority over here. They knew it was a high priority of mine,’ said Harkin, the Iowa Democrat who is chairman of the Senate Agriculture Committee.”
National Public Radio also provided a look at the Farm Bill debate in a segment that was aired yesterday on Morning Edition.
Filed by Adam Davidson, a summary of the segment noted that, “The farm bill is up for debate in the House of Representatives. Although environmentalists, advocates for the poor and economic conservatives have joined forces, most think their battle will be lost because large agribusiness interests are just too strong.”
The segment lasts about 4:30 minutes and can be heard by clicking here.
With respect to the Doha round of WTO trade talks, Reuters news reported on Monday that, “The presidents of Brazil and the United States are determined to push stalled global trade talks and Washington hopes to see some progress in coming weeks, the U.S. ambassador to Brazil said on Monday.
“Brazil and the United States are part of a core group of negotiators, including India and the European Union, which failed to reach a framework agreement within the World Trade Organization’s Doha round of talks.
“‘The presidents are very, very much focused on getting a positive response,’ said Ambassador Clifford Sobel, who accompanied high-level bilateral talks in Brazil this month centering on the Doha round.”
However, Financial Times writer Alan Beattie reported on Wednesday that, “Serious opposition emerged on Wednesday to new proposals to cut manufacturing tariffs in the troubled Doha round of trade talks, with a group of developing countries saying the draft agreement was unacceptable.
“The group, led by South Africa and including Argentina and Venezuela, wants to continue protecting its industry against imports.
“Its stark warning stands in contrast to comments by ministers from other countries on Wednesday, who said the negotiations had a good chance to make progress.”
Yesterday, the WTO issued a news release, which noted in part that, “Director-General Pascal Lamy, in opening the Trade Negotiations Committee meeting on 26 July 2007, urged Members to study the draft texts on agriculture and industrial goods during the summer break and come back in September ‘ready to engage in intensive negotiations’. ‘We have already come a long way in this Round, and the distance left to go is not so great — but it will require an extra effort,’ he said.”