Tax Issues: Political Background- Bill Passes Senate, House Vote Expected Today- Estate Tax Concerns Weakened But Lingering
David M. Herszenhorn reported in today’s New York Times that, “The Senate on Wednesday approved the $858 billion tax plan negotiated by the White House and Republican leaders, and House Democrats said they expected to pass the bill on Thursday after a final, and seemingly futile, effort to change a provision that benefits wealthy estates.
“The Senate vote was 81 to 19 as Democrats yielded in their long push to end the Bush-era lowered tax rates for high-income taxpayers.”
The Times article explained that, “In the House, Democratic leaders said they would bring the bill to the floor on Thursday along with an amendment to tax more estates at a higher rate. Democrats predicted privately that the amendment would be rejected and the package approved, but the House speaker, Nancy Pelosi, was not ready to concede.
“‘We will make our point,’ Ms. Pelosi said at a news conference Wednesday evening, in which she repeated her opposition, shared by many Democrats, to the provision granting a tax exemption to estates of up to $5 million per person, or $10 million per couple. Republicans have said they will not accept any change.
“Other Democrats predicted the tax plan would be passed as is on Thursday, making clear that their initial fury at the prospect of extending Bush-era tax rates even on the highest incomes had given way to acceptance that the White House, its leverage weakened by midterm election losses, had negotiated the best compromise it could. President Obama urged Congress again on Wednesday to pass the bill unchanged and without delay.”
Mr. Hersenhorn added that, “[Pres.] Obama praised the Senate action, calling the bill ‘a win for American families, American businesses and our economic recovery,’ even as he nodded to the tough bargain he had struck, adding, ‘It includes some provisions that I oppose.’”
Janet Hook reported in today’s Wall Street Journal that, “House floor debate is set for Thursday. Democratic leaders Wednesday tried to set ground rules that would allow persistent critics of the bill’s estate-tax provisions to voice opposition without killing the bill.
“The rules will allow a vote on an alternative bill that would raise the estate tax and make it apply to more inheritances, an approach favored by critics who remain unhappy with Mr. Obama’s concessions on upper-income taxpayers. If the alternative is approved, that would send the bill back to the Senate, but even supporters of the higher estate tax have doubts about it passing.”
Lori Montgomery and Shailagh Murray reported in today’s Washington Post that, “House Speaker Nancy Pelosi (D-Calif.) told reporters that she ‘would love to see’ the House change the estate tax provisions. But an aggressive White House lobbying campaign and the lopsided Senate vote appeared to be tamping down opposition.”
Tax Issues: Biofuels
Reuters writers Tom Doggett and Charles Abbott reported yesterday that, “The Senate on Wednesday voted in favor of a one-year extension of the ethanol tax credit and the ethanol import tariff at existing rates, despite complaints the subsidies were wasteful.”
The article pointed out that, “The 45-cent-a-gallon tax credit and the 54-cent tariff were to expire on December 31. A one-year extension means Congress will face the contentious biofuels question again next year.
“Senator Dianne Feinstein was rebuffed in a last-ditch attempt to cut the tax credit and the tariff to 36 cents each. Senate leaders declined to call a vote on her amendment.”
“The Senate bill also extends for one year the 10-cent a gallon small-producer credit and revives through 2011 the $1 a gallon biodiesel tax credit that expired at the end of 2009,” the article said.
Philip Brasher reported yesterday at the Green Fields Blog (Des Moines Register) that, “‘I’ll continue to press for a solution and plan to introduce legislation the first day of the new Congress,’ Feinstein said in a statement issued after the vote. ‘The ethanol industry is the only one to ever receive the triple crown of government intervention. Ethanol use is mandated by law, its users receive federal subsidizes and domestic production is protected by tariffs. That policy is not sustainable.’”
DTN writer Todd Neeley documented some of the reaction to yesterday’s Senate vote, and the biofuels provisions, in an article from yesterday. He noted in part that, “Sen. Charles Grassley, R-Iowa, said the extension of the ethanol subsidies shows that the industry has proven its worth.”
Sen. Ben Nelson (D-Neb.) indicated in a statement yesterday that, “If the ethanol tax credit is allowed to expire, it would create financial trouble for Nebraska’s 25 plants and could result in us losing 13,700 jobs.”
Renewable Fuels Association (RFA) CEO and President Bob Dinneen stated yesterday that, “The Senate appropriately recognized the economic value of domestic ethanol production. Extending these key incentives for American ethanol production and use will help save American jobs and provide the market stability allowing the industry to continue to grow.”
And Growth Energy CEO Tom Buis indicated yesterday that, “This bipartisan vote shows that the Senate is committed to enacting sound tax policies that invest in green industries, like ethanol, to reduce our dependence on foreign oil, create jobs here in the United States, improve our environment and strengthen our national security. Extending the current ethanol tax incentives for one year will give Congress the time to act on a plan to build out our nation’s renewable fuel infrastructure, as proposed in our Fueling Freedom proposal, and give consumers a choice at the pump that includes clean, renewable American ethanol.”
Todd Neeley reported yesterday at the DTN Ethanol Blog that, “Though the U.S. ethanol industry appears poised to receive a one-year extension of the 45-cent volumetric ethanol excise tax credit and the 54-cent import tariff, it likely falls short of what ethanol producers need as a market signal going forward.
“A few months ago Growth Energy offered what it calls the Fueling Freedom plan to gradually phase out the blenders credit and other supports, and to increase government investment in ethanol infrastructure including flexible-fuel vehicles, blender pumps and dedicated ethanol pipelines.”
Mr. Neeley added that, “However, the Renewable Fuels Association has not endorsed the Fueling Freedom plan — although Dinneen and RFA have indicated that a broader ethanol policy discussion is necessary.”
Meanwhile, a news release from yesterday from a diverse group of organizations representing the food industry, animal agriculture, environmental groups, and budget watchdogs contained a number of perspectives articulating the potential negative consequences relating to the extension of the biofuels provisions.
And Bloomberg writer Mario Parker reported yesterday that, “Ethanol futures rose to a four-week high in Chicago after the U.S. Senate passed an $858 billion tax-cut plan that includes incentives to help buoy demand for the biofuel.”
In a separate development regarding biofuels, Reuters writer Charles Abbott reported yesterday that, “A mammoth government funding bill awaiting a Senate vote would cut off funding for a program that pays farmers to experiment with biomass crops.
“Spending on the Biomass Crop Assistance Program, or BCAP, would be halted less than two months after the Obama administration unveiled rules for it.
“The Agriculture Department, which runs BCAP, urged senators on Wednesday ‘to make the corrections necessary so there are resources to continue building a sustainable biofuels industry.’”
Incoming House Ag Committee Chairman Frank Lucas (R-OK) was a guest on yesterday’s AgriTalk Radio Program with Mike Adams, where the two discussed a variety of issues relating to the Farm Bill.
As for the 2012 Farm Bill, Lucas said money would be tight. They expect to get a budget figure from leadership in the spring of 2012 and then use that figure to form the Farm Bill. He admits that direct payments may be on the table [related audio available here].
In addition, Rep. Lucas said that Conservation Reserve Program (CRP) rules should be relaxed so that CRP acreage could be used as a ‘relief valve’ in the food versus fuel debate [related audio available here].
And Rep. Lucas added that he would put off discussion of a new farm bill until 2012. Instead, the committee in 2011 will focus on oversight of regulations from USDA, EPA and other agencies [related audio available here].
Also yesterday, the USDA’s Economic Research Service (ERS) released its “Agricultural Income and Finance Outlook” report, which stated in part that, “Net farm income is forecast at $81.6 billion in 2010, up 31 percent from 2009 and 26 percent higher than the 10-year average of $64.8 billion for 2000 to 2009.”
The ERS report noted that, “Government payments paid directly to U.S. agricultural producers are expected to total $12.4 billion in 2010, a 1.5-percent increase from $12.3 billion paid out in 2009. This level would be 19 percent below the 5-year average for 2005-09.”
In addition, the comprehensive ERS analysis included a discussion beginning on page 13 on the issue of direct payments and crop insurance- “Spatial Concentration and Program Coverage Overlap of Direct Payments and Crop Insurance Subsidies.”
The report indicated that, “USDA, congressional representatives, and farm organizations have held discussion forums with farmers around the country in 2009-10 to discuss the upcoming 2012 Farm Bill. One proposal that has been discussed would replace direct payments with a new system based on a ‘revenue assurance’ program to provide insurance against crop and livestock losses. The impetus for this proposal is to address current Federal budget pressures and the criticism that direct payments are made to farmers even when commodity prices are high. Farmers’ level of support for this proposal varies by region.
“Figure 1.7 displays the spatial concentrations of direct payments from the Direct and Counter-cyclical Program and indemnity payments from the crop-insurance program. For a particular county, if producers received direct payments in 2008 equal to or above $20 per cropland acre and crop insurance indemnity payments averaged over 2007 to 2009 of less than $20 per crop- land acre, then direct payments are said to be dominant. If producers received direct payments below $20 per cropland acre and crop-insurance indemnity payments equal to or above this amount, then crop-insurance indemnity payments are said to be dominant. If producers received both direct payments and crop-insurance indemnity payments at or above $20 per cropland acre, then there is program coverage overlap.”
In other policy related developments, Joseph Morton reported yesterday at the Omaha World Herald Online that, “Rep. Adrian Smith says a map of the United States clinched his new spot on the powerful House Ways and Means Committee.
“When the Nebraska Republican met with the group in charge of recommending congressional committee assignments, he highlighted the home districts of the Ways and Means’ current GOP membership.”
The article noted that, “Outside of Texas, the midsection of the country was clear — from the Mississippi River to the Rocky Mountains.
“‘Midwestern agricultural perspective was lacking from the committee,’ Smith said.”
Yesterday’s article also noted that, “By taking a seat on Ways and Means, Smith will have to give up his other committees, including his spot on ag. But he said his new committee has jurisdiction over areas of great importance to his constituents, including those in farming and ranching. The issues: taxes and trade.
“‘I hear more from producers, ag producers, about their concerns on the estate tax, really, than the farm bill,’ Smith said.
“Smith plans to work toward a full, permanent repeal of the estate tax. He also will be able to defend ethanol subsidies, including a 45-cents-per-gallon tax credit. Promoting trade deals that help U.S. agriculture exports also will be a top priority, he said.
“‘The farm bill is once every five years, and trade issues come up more often than that,’ Smith said.”
Dan Piller reported yesterday at the Green Fields Blog (Des Moines Register) that, “The annual survey of Iowa farm land prices by Iowa State University shows a 15.9 percent to an average of $5,064 per acre, up from $4,351 per acre last year.
“The figure approaches the all-time high, inflation-adjusted average of $5,711 per acre in 1979.”
Reuters writer Emily Stephenson reported yesterday that, “An animal-welfare group accused Smithfield Foods Inc., the world’s largest pork producer, of inhumane treatment of pigs and piglets, releasing a video documenting what the group said were cruel practices.
“The Humane Society of the United States said that it documented mistreatment of the animals after a month-long investigation at a Waverly, Virginia, facility owned by Smithfield subsidiary Murphy-Brown.”
The article added that, “Smithfield Foods Chief Sustainability Officer Dennis Treacy said in a statement that the company had been alerted to improper behavior by an employee hotline and had brought in animal welfare experts to assess the facility.”
A news release yesterday from the National Pork Producers Council stated that, “Contrary to proponents of banning antibiotics in food-animal production, a government report issued last Friday does not show America’s livestock and poultry producers are using ‘massive’ amounts of antibiotics.
“The U.S. Food and Drug Administration report includes data on sales of all antibiotics intended for use in farm animals. For 2009, 28.7 million pounds of antimicrobial drugs were sold; nearly 29 percent of that amount was ionophores, compounds not used in human medicine.”
Ben Geman reported yesterday at The Hill’s Energy Blog that, “Sen. Jay Rockefeller (D-W.Va.) isn’t giving up on his long-shot effort to block the Environmental Protection Agency’s looming greenhouse-gas rules in the lame-duck session.
“Rockefeller — who fears the rules will harm his state’s coal-heavy economy — said Wednesday he is in ‘intense negotiations’ over trying to add his plan to the omnibus spending package.”
Reuters writers Charles Abbott and Tom Doggett reported yesterday that, “The futures regulator acknowledged on Wednesday it will miss the January target for issuing a final rule on limiting the amount of contracts a trader can control in agricultural, energy and metals markets.
“The U.S. Commodity Futures Trading Commission will also propose phasing in position limits, putting them first on the spot month and then deferred months or positions in all months combined. The CFTC will unveil the details of its plan on Thursday in its almost three-year crusade to prevent a repeat of the 2008 surge in commodity prices to record highs.”
The article added that, “CFTC Chairman Gary Gensler told a House Agriculture subcommittee that a final rule would be issued ‘as soon as we can sort out’ the public comments on the proposal, which would be open to comment for 60 days. The Agriculture Committee has jurisdiction over CFTC.”
Bloomberg writers Silla Brush and Asjylyn Loder reported yesterday that, “The Commodity Futures Trading Commission will miss a mid- January deadline to impose trading restrictions on commodities including oil, natural gas, silver and gold, CFTC Chairman Gary Gensler told a House Agriculture subcommittee today at a hearing in Washington. CFTC commissioners will consider the so-called position limits at a meeting tomorrow.
“‘If we were to propose something tomorrow, it will have a healthy comment period from the public, and that will by its very nature go past the January date,’ he said. ‘So I will tell Congress that no, we will not finalize this by that statutory date.’”