Tax Issues: Political Background
Carrie Budoff Brown and Jonathan Allen reported last night at Politico that, “A wave of new Democratic support Wednesday signaled that President Barack Obama’s deal to renew the Bush tax cuts would make it through Congress, as long as most Republicans lined up behind it as expected.
“With Democrats in both chambers still angry about parts of the package, the administration scrambled to allay concerns and build momentum for the unusual deal with congressional Republicans reached this week. By the end of the day, the measure looked increasingly likely to pass, as Democrats stepped forward one by one to back it.”
Reuters writers Kim Dixon and Richard Cowan reported yesterday that, “Senate Democratic Leader Harry Reid said the chamber could begin to debate the proposal to extend all Bush-era income tax cuts within a day or two, in a sign Democrats may be conceding on the deal.”
Janet Hook and John D. McKinnon reported in today’s Wall Street Journal that, “The sweeping tax package negotiated by President Barack Obama and Republican lawmakers gained new momentum toward passage in the Senate, building pressure on balking House Democrats to accept the controversial deal.”
And Lori Montgomery and Shailagh Murray reported in today’s Washington Post that, “Senate leaders are planning to begin debate on a far-reaching tax package as soon as Thursday as rank-and-file Democrats warm to an agreement between the White House and Republicans to extend a host of expiring tax cuts and pump fresh cash into the economy.”
A news item released yesterday from Sen. Ben Nelson (D-Neb.) stated that, “Today, [Sen. Nelson] said that the new bipartisan tax cut plan worked out by the President may have enough support to pass the U.S. Senate.”
“The senator also called the new bipartisan tax cut proposal, ‘a move in the right direction,’” and added that, “‘I’m hoping it addresses the controversial IRS form 1099 provision in the health care bill that will impose a paperwork nightmare on our small businesses and agriculture. I’m also hoping that tax incentives for renewable fuels such as ethanol are part of a so-called tax extenders package.’”
A news item yesterday from Sen. Budget Committee Chairman Kent Conrad (D-ND) indicated that, “[Sen. Conrad] today announced that he will work to improve — and eventually support — a broad proposal to extend expiring tax cuts in an effort to create jobs, strengthen economic growth, and avoid tax increases for millions of middle-class Americans.”
Alexander Bolton reported yesterday at The Hill Online that, “Leading members of the Senate Democratic conference predict the tax deal struck between President Obama and GOP leaders will pass the Senate, making the House the main battleground.”
Mr. Bolton noted that, “Democrats who have criticized the deal such as Sens. Tom Harkin (D-Iowa) and Mary Landrieu (D-La.) have left open the possibility of supporting the package in the end.
“‘I was inclined to vote no but it’s still a work in progress,’ said Harkin. ‘Let’s see what happens, things are happening.’”
Nonetheless, The Hill article added that, “Liberal Democrats in the House have mobilized to defeat the tax deal, which has received strong criticism from progressive advocacy groups and unions.
“Thirty-four House Democrats have signed a letter circulated by Rep. Peter Welch (D-Vt.) stating their strong opposition to the deal.”
The Hill item noted that, “‘We oppose acceding to Republican demands to extend the Bush tax cuts to millionaires and billionaires for two reasons,’ the lawmakers wrote in a letter addressed to House Speaker Nancy Pelosi (D-Calif.).
“They said the deal is ‘fiscally irresponsible’ because it adds ‘$700 billion to our national debt’ and is unfair because it helps wealthy families at the expense of the middle class.”
Tax Issues: Biofuels
Reuters writer Charles Abbott reported yesterday that, “An extension of the major U.S. ethanol subsidy ‘is part of the deal at the moment’ in negotiations for an omnibus tax bill, but the size and lifespan of the subsidy are not set yet, a trade group said on Wednesday.
“The chairman of the Senate Budget Committee told reporters ethanol ‘was in a separate section of things to be resolved’ and there was no decision on a subsidy rate. Chairman Kent Conrad discussed the issue with fellow Democrats.”
Mr. Abbott pointed out that, “In a statement, the Renewable Fuels Association said an extension of the credit ‘is part of the deal at the moment,’ according to congressional and Obama administration sources.
“‘The final details — the length of the extension and the value of the credit — are still being discussed,’ said RFA. It cautioned that the contents of the tax bill still could change.”
Ben Geman reported yesterday at The Hill’s Energy Blog that, “A quick update on the fate of expiring ethanol industry tax credits: The Renewable Fuels Association, an ethanol trade group, said some kind of extension remains in the mix in wider Capitol Hill negotiations to extend Bush-era income tax cuts.
“The incentives are the subject of a political battle that pits farm-state advocates of the fuel against a left-right coalition — ranging from Tea Party supporters to green groups — that opposes the subsidies.”
Meanwhile, The New York Times editorial board opined today that, “Last-minute negotiations over the tax package could send America’s energy policy in exactly the wrong direction. If budget-conscious Republicans have their way, tax credits for renewable energy sources like wind and solar power would be allowed to expire, while wasteful and unnecessary tax breaks for corn ethanol — an environmentally dubious fuel supported by farm-state legislators of both parties — would be extended….[C]ongress should keep the subsidies for renewable energy while jettisoning the subsidies for corn ethanol. That makes sense for the environment, the economy, and for American taxpayers.”
Similarly, The Washington Post editorial board noted today that, “If you’re wondering which of America’s leaders are serious about cutting wasteful government spending, you might start by examining who’s behind the effort to extend tax breaks to America’s corn ethanol industry, which expire at the end of the year…[A]n extension of the corn ethanol provisions shouldn’t be part of the deal that’s emerging on the Bush tax cuts, and if it is, senators should remove it from the resulting legislation. While they’re at it, lawmakers should reconsider their blending mandate, too. There are far better ways to address oil dependence and greenhouse emissions.”
Biofuels- Economic Considerations
Javier Blas reported yesterday at The Financial Times Online that, “The tax deal between President Barack Obama and congressional Republicans will be key for agricultural commodities, particularly corn.
“If confirmed, the extension of the tax credit, which formally expires on December 31, will support corn consumption just as inventories shrink to their lowest levels in 15 years. Ethanol is a big part of the corn supply-and-demand balance sheet.”
The FT article noted that, “The US exports about half of the world’s corn, so domestic changes in supply or demand, even if small, have a ripple effect worldwide. Darrel Good, a respected agricultural economist at the University of Illinois, says that ‘a renewal of the tax credit, even at a lower level, would point to continued strong ethanol demand and the likelihood of ethanol production exceeding the mandate’. He adds: ‘Current ethanol and gasoline prices favour ethanol blending – ethanol prices lower than gasoline prices – and would support corn prices at current or higher levels.’
“The market will get a clearer view as soon as details from Congress emerge, possible after the weekend.”
Mr. Blas added that, “In the meantime, the US Department of Agriculture will update its supply and demand forecast on Friday. The USDA said back in November that the country’s corn stocks would drop to a 15-year low of 827m bushels by the end of the season – late August 2011 – the lowest since the 1995-96 season, when stocks fell to 426m bushels. The market is braced for a further reduction of the forecast on Friday and another one in January in spite of the highest prices for two years.”
Bob Glissmann reported yesterday at the Omaha World-Herald Online that, “The Nebraska average for regular gas was $2.97.5 a gallon. The national average was almost a penny less. Iowa’s average was about $2.91 a gallon.
“Blame higher crude oil prices for the bump, said Rose White, spokeswoman for AAA Nebraska. Crude oil had been trading as high as $90 a barrel, White said, and was about $88 a barrel on Wednesday. A year ago, crude was trading at about $76 a barrel, White said.”
John D. McKinnon and Laura Saunders reported in today’s Wall Street Journal that, “The estate tax has emerged as a focus of Democrats’ anguish over the tax deal hashed out between President Barack Obama and Republicans. But the protests appear unlikely to derail the compromise in Congress.
“Notably, Democratic support for the estate-tax provision appeared stronger in the Senate, particularly among incumbents facing re-election in 2012, than in the House.
“The plan put forward by Republicans and accepted by Mr. Obama would reinstate the estate tax at 35% for two years starting next year, with the first $5 million of a person’s estate exempted. If Congress doesn’t act on the expiring Bush-era tax breaks before the end of the year, the estate tax, which lapsed for 2010, would spring back at a 55% rate, with just a $1 million exemption.”
Tom Steever reported yesterday at Brownfield that, “U.S. Agriculture Secretary Tom Vilsack says the Obama tax cuts have benefits for farm and rural families. In an interview with Brownfield, the Secretary said that the compromise the President reached with Republican lawmakers will help those families stretch scarce resources.
“‘And then for farm families and ranch families, obviously they’re keeping an eye on the discussions about the estate tax and the need for relief to avoid going back to rates January one of 2011,’ said Secretary Vilsack. ‘That would make it very difficult, as we’re seeing rising land prices.’”
With respect to “rising land prices,” The Wall Street Journal editorial board today provided an interesting look at the U.S. agricultural economy that provides an interesting backdrop to the future debate about farm policy.
The Journal item noted in part that, “The overall U.S. economy may be struggling, but you wouldn’t know it from a visit to the Farm Belt. A boom is under way across much of the rural Midwest, with agricultural land prices growing at a double-digit clip and farm auctions in certain counties fetching record sales.
“One question to ponder: Is this boom rooted in genuine economic gains, or is it another Federal Reserve-induced asset bubble? We lean toward the bubble view.”
After a very detailed analytical look at several economic variables, the Journal opinion item concluded by saying, “We hope Fed Chairman Ben Bernanke is right when he says asset bubbles and price spikes in commodities are nothing to worry about. Of course, he said the same thing about housing and oil in the last decade. We’re not predicting an imminent bust, but we do hope someone at the Fed is watching prices grow in farm country.”
Meanwhile, Bloomberg writer Alan Bjerga reported yesterday that, “Representative Frank Lucas, Republican of Oklahoma, has been selected to lead the House Agriculture Committee when the new Congress convenes in January.”
And a news item earlier this week from the Illinois Farm Bureau stated that, “Delegates at the Illinois Farm Bureau Annual Meeting approved resolutions dealing with the upcoming 2012 Farm Bill and the U.S. Environmental Protection Agency at the Bureaus 96th annual meeting December 4-7 in St. Louis.
“In a resolution related to the 2012 Farm Bill, delegates created a top tier of favored programs that includes direct payments and enhancements to both the Average Crop Revenue Election (ACRE) program and crop insurance, in advance of the American Farm Bureau Federation annual meeting in Atlanta in January. The resolution indicates the delegations support for a bill that is consistent with U.S. obligations under the World Trade Organization and maintains funding levels in the 2008 Farm Bill.”
In other news, Sara Murray reported yesterday at the Real Time Economics Blog (Wall Street Journal) that, “Some 42.9 million people collected food stamps last month, up 1.2% from the prior month and 16.2% higher than the same time a year ago, according to the U.S. Department of Agriculture.
“Nationwide 14% of the population relied on food stamps as of September but in some states the percentage was much higher. In Washington, D.C., Mississippi and Tennessee – the states with the largest share of citizens receiving benefits – more than a fifth of the population in each was collecting food stamps.”
Philip Brasher reported yesterday at the Green Fields Blog that, “The House has sent the food safety bill back to the Senate piggybacked on a catchall spending bill. The combined legislation passed tonight 212-206.
“The Senate already passed the food safety bill 73-25 but the measure’s future was thrown into doubt because the bill included revenue provisions that should have been first approved by the House. Fixing the bill was no problem, but House leaders didn’t want to send the legislation by itself back to the Senate for fear that it could be blocked by Republicans who don’t like it. So the measure was attached to the must-pass spending measure. Now, the Senate needs to act on the combined bill. The Senate, has been working on its own version of the appropriations measure.”
P.J. Huffstutter reported in today’s Los Angeles Times that, “Exactly how much space is a chicken legally entitled to have in a California henhouse?
“A Modesto farmer sued the state and the Humane Society of the United States on Wednesday seeking to answer that question, as egg producers begin overhauling their operations to meet an anti-cruelty measure that was approved by state voters in 2008.
“The lawsuit, filed in Fresno County Superior Court by egg farmer J.S. West, is asking for a judge to interpret and clarify California’s Prevention of Farm Animal Cruelty Act, known as Proposition 2.”
Today’s article added that, “J.S. West argued that the law’s language was too vague. The company said it has already enlarged the housing cages for about 8% of its flock this year but hesitates to sink an estimated $30 million into the remainder of the overhaul until it has more clarity on the cage specifications.
“The measure’s ballot language states that hens must be able to ‘lie down, stand up, fully extend their limbs and turn around freely.’ But it does not give exact dimensions for cages and enclosures.
“‘We’re not challenging the legality’ of the law, said Stephen J. Meyer, an attorney for J.S. West. ‘We’re simply trying to determine if the $3 million spent [by the company so far] was well spent. We need a determination as to what we need to do. If we’re wrong, we need to know that too.’”
Andrew Restuccia reported yesterday at The Hill’s Energy Blog that, “With their hopes of passing a broad climate change bill in the Senate dashed, two senators who played a key role in this year’s failed effort to move a cap-and-trade bill are already making plans to push a wide-ranging energy bill next year.
“In an interview with The Hill Wednesday, Sen. Joseph Lieberman (I-Conn.) said he and a number of Democrats are beginning to discuss moving an energy bill early next year. He said he hopes to work with Republicans on the details of the proposal.”
Yesterday’s update added that, “Sen. John Kerry (D-Mass.), speaking to reporters Tuesday in the Capitol, said there will be a ‘huge energy debate’ early next year in the Senate.”