- FarmPolicy - http://farmpolicy.com -
Budget- Estate Tax; Farm Bill; Ag Economy; and, Trade
Posted By Keith Good On December 11, 2012 @ 5:11 am In Agricultural Economy,Budget,Farm Bill,Trade | Comments Disabled
Budget- Estate Tax
Ramsey Cox reported yesterday at The Hill’s Floor Action Blog that, “Sen. Orrin Hatch (R-Utah) called on President Obama to ‘end the death tax’ on Monday.
“At the end of the year, the current rate of the estate tax — also called the ‘death tax’ — will go from 35 percent on assets valued at more than $5 million to 55 percent on assets of more than $1 million. Hatch called that a ‘burden’ that ‘can be a death sentence for the American workers and family farms.’
“‘We ought to repeal the death tax,’ Hatch said on the floor Monday. ‘It might make sense in a college social justice seminar but it doesn’t make sense in a thriving economy.’”
(Note a video replay of Sen. Hatch’s remarks from yesterday can be viewed at FarmPolicy.com Online, and a transcript of yesterday’s presentation is available here. Sen. Hatch is the Ranking Member of the Finance Committee.)
Yesterday’s update noted that, “Hatch pointed out that there are significantly more farms across the United States that are worth more than $1 million than those worth more than $5 million. In a chart, he showed that in South Dakota, which has been hit hard by drought this year, 15 percent of family farms are worth more than $5 million, whereas 49 percent are worth more than $1 million.
“Hatch said he’s heard that the estate tax is the No. 1 reason why family farms are sold rather than kept in the family.”
Recall that last week both Sen. John Barrasso (R., Wyo.) and Sen. Roy Blunt (R., Mo.) also highlighted the estate tax issue on the Senate floor.
In a column Friday, Rep. Kristi Noem (R., S.D.) indicated that, “South Dakota is a state that runs on small businesses and family farms. In the face of the economic and regulatory challenges thrown at them over the past several years, the resilience of our business and agriculture communities is inspiring. Unfortunately, there is another challenge on the horizon. This challenge is the estate tax, commonly referred to as the ‘death tax.’”
Rep. Noem added that, “According to data compiled by the nonpartisan Joint Committee on Taxation, nearly 14 times as many small businesses and 24 times as many farms would be hit by the death tax. In South Dakota alone, we’re looking at as many as 71 percent of crop producers being impacted, according to the Farm Bureau.”
Lori Potter reported on Saturday at the Kearney Hub (Neb.) Online that, “J.D. Alexander has seen several threats to the cattle industry and agriculture in general during his year National Cattlemen’s Beef Association president… [H]owever, nothing has the Pilger farmer and cattleman more concerned about agriculture’s future than the possible expiration of the current federal estate tax exemption and rate. If Congress doesn’t renew them by the end of the year, the exemption will drop from $5 million to $1 million per person, and the rate will jump from 35 percent to 55 percent.
“He believes that would do more to ruin rural America than anything in U.S. history. ‘Small rural towns could disappear if nothing is done with this,’ Alexander said Friday at the Nebraska Cattlemen annual convention in Kearney.”
Urban C. Lehner noted in a DTN update yesterday that, “Soaring land values put farmers’ heirs in a potential pickle. When mom and dad die they could end up owing Uncle Sam hundreds of thousands or even millions of dollars in estate tax. To raise the cash some may end up having to sell the farm.
“That’s true even under today’s relatively favorable estate-tax regime: a tax rate of 35% and an exemption of $5 million per spouse. If the politicians can’t strike a compromise and we end up going over the fiscal cliff, we will go back on January 1 to the 2001 regime: a 55% rate and a $1 million exemption.
“That’s the bad news. The good news is that so many people would suffer under those conditions that Congress will likely do something early next year to fix the problem. Andy Biebl, a CPA at CliftonLarsonAllen who teaches seminars for CPAs in more than two dozen states, is one of many experts who think there’s little chance future estates will be taxed under the 2001 rules.”
In broader budget developments, Damian Paletta and Carol E. Lee reported in today’s Wall Street Journal that, “Budget negotiations between the White House and Republican House Speaker John Boehner have progressed steadily in recent days, people close to the process said, breathing life into talks that appeared to have stalled.
“Both sides still face sizable differences before any agreement might be reached by the end of the year, and talks could well falter again over such controversial issues as taxes and Medicare before any deal is reached.
“The people familiar with the matter say talks have taken a marked shift in recent days as staff and leaders have consulted, becoming more ‘serious.’ Both sides have agreed to keep details private, according to the people, who declined to detail where new ground was being broken.”
And, Meredith Shiner and Steven T. Dennis reported today at Roll Call Online that, “However, the primary differences between the two sides remain. Boehner’s office said the speaker is waiting for the White House to come back to Republicans with more spending cuts. And the White House says the president is waiting for the GOP to give more on revenue. Two years of fighting over how to rein in the federal debt is now coming down to two weeks of deal-making at best and he-said/she-said at worst.”
Farm Bill Issues
Lolly Bowean reported in yesterday’s Chicago Tribune that, “As wealthy and middle-class Americans keep an eye on Washington to see if a solution to the ‘fiscal cliff’ will mean an increase in their annual tax bills, Chicago’s poorest residents are looking at how they too may be affected. Besides legislation that would mainly affect taxes, also on the table are cuts to a wide range of social programs — some that are vital to hunger relief, officials said.
“The farm bill — which sets guidelines and funding for the Supplemental Nutrition Assistance Program, or SNAP, among other matters — expired in September, and has not been renewed as Congress continues to debate how the aid programs it supports should work.
“Some aid organizations fear a bill that would stiffen the requirements to qualify for food stamps could be approved as a part of the fiscal cliff negotiations, said Bob Dolgan, a spokesman for the Greater Chicago Food Depository.”
The article added that, “Critics of food stamps and government spending, however, argue that too many families have become dependent on government aid.”
The Tribune article pointed out that, “The portrait of a family dependent on food stamps has changed, said Diane Doherty, the executive director of the Illinois Hunger Coalition. There are families who may live in a home they own, have a member working and even have access to a car, but they still fall below the poverty line and qualify for help, she said.”
The “Washington Insider” section of DTN reported yesterday (link requires subscription) that, “Asked during a question-and-answer period [last week as he appeared before a Farm Journal outlook conference in Washington] what action should be taken in the farm bill on cutting food stamps, [Agriculture Secretary Tom Vilsack] said the debate is one in which rural Americans often take a questionable position. While he thinks USDA should continue to increase efficiency and reduce fraud and abuse the nutrition battle is ‘a good example of a battle that we are having that is not strategic.’
“He noted that 90% of the people who get food stamps are senior citizens, persons with disability, children or working people who can’t make ends meet. Rural Americans, he said, ‘stigmatize those people’ and view the program as a competitor to farm subsidies even though it is not. When farmers criticize food stamps, Vilsack said, food stamp beneficiaries think ‘those rural folks are against us.’ People in the cities don’t understand that the commodity title in the farm bill is connected to the food supply, he said, but when farmers criticize the food programs, ‘the situation becomes a fight.’”
Also on the nutrition issue, a news release yesterday from Senate Ag. Comm. Ranking Member Pat Roberts (R., Kans.) stated that, “[Sen. Roberts] today said the U.S. Department of Agriculture (USDA) has agreed with his request to grant schools flexibility in implementing the new guidelines for the National School Breakfast and Lunch programs, but significant concerns remain on waste and costs of the new policies.
“‘Providing flexibility is a key component to implementing such dramatic changes to school meals, and I applaud Secretary Vilsack for responding to my request,’ Roberts said. ‘However, I am still concerned with USDA’s lack of fully understanding the estimated costs to schools and plate waste once they are required to meet all of USDA’s new rules. I will continue to monitor the implementation of this rule, and its impact on schools in Kansas as well as the rest of the country. I look forward to working with Secretary Vilsack to continue to improve school nutrition while ensuring our students are adequately fed.’”
Meanwhile, a news release yesterday from the American Soybean Association (ASA) stated that, “As Congress continues to debate potential solutions to the fiscal cliff issue, the [ASA] reached out today to leaders of the House and Senate Agriculture Committees to provide its views on potential provisions in a comprehensive five-year farm bill.
“In a letter from ASA President Danny Murphy, ASA restated its support for many of the provisions included in both the House and Senate versions of the farm bill, and expressed specific support for the Senate’s Agricultural Risk Coverage (ARC) program, which will provide important protection against reductions in both price and yield. ASA also pointed out major drawbacks to the Price Loss Coverage (PLC) option included in the House bill identified in a recent analysis by AgRisk Management, LLC.”
Nick Gale reported yesterday at the Alton Daily News (Il.) Online that, “An Illinois congressman believes there will be a link between a deal to avoid the fiscal cliff and coming to a compromise on the Farm Bill. U.S. Rep. Aaron Schock (R-Peoria) says any deal cut to avoid the fiscal cliff could include a deal on the Farm Bill. ‘The expectation now is the Farm Bill will be included in whatever package is negotiated relative to the fiscal cliff,’ Schock said.”
However, Reuters writer Charles Abbott reported yesterday that, “Congress should slash at least $100 billion in costs from the U.S. farm bill – three or four times more than cuts currently proposed – and resist calls for a hurry-up vote this week, a dozen anti-deficit and environmental groups said on Monday.
“At a news conference, they said the $5 billion-a-year ‘direct payment’ subsidy to farmers should be eliminated as part of temporary legislation that would bridge the gap to a new five-year law in 2013.
“That would give lawmakers time for a clear-eyed overhaul of farm policy, they said.”
A recent article at Europolitics Online reported that, “As US lawmakers try to wrap up talks on a new US$1 trillion Farm Bill, they look set to approve a big increase in a type of subsidy that is considered trade-distorting by the World Trade Organisation (WTO). Washington is jettisoning the direct payment’ subsidy that the US pioneered in the 1990s and which now forms a core component of the EU’s farm support regime. Instead, Congress is on the cusp of increasing crop insurance-based subsidies.
“‘The writing is on the wall that we will see the end of direct payments as we currently know them,’ said Joe Glauber, chief economist at the US Department of Agriculture (USDA), speaking at Johns Hopkins University in Washington DC, on 7 December. ‘There is so little public support’ for direct payments in the US, he explained, as the media has highlighted how they continue to be paid to farmers even if they do not produce a crop. By contrast, support on Capitol Hill for crop insurance is high, with the latest draft bills under consideration by the House and Senate augmenting the payment levels for crop insurance proposed by the US administration.”
The article added that, “Direct payments are classified by the WTO as non-trade-distorting or green box‘, meaning there is no ceiling on them. EU farmers currently receive more than €40 billion annually in direct payments. Speaking at Johns Hopkins University alongside the USDA’s Glauber, Tassos Haniotis, director at the European Commission’s Agriculture and Rural Development DG, predicted that the direct payments total would be ‘overall the same’ under the future EU farm support framework for 2014-2020, which will be negotiated in 2013.”
The Europolitics article explained that, “However, there are voices in Europe in favour of bolstering crop insurance, especially in Southern EU member states like Spain and Italy. Asked for his view of the US Farm Bill, the Chairman of the European Parliament’s Committee on Agriculture and Rural Development (AGRI), Paolo De Castro (S&D, Portugal), told Europolitics that he was following the debate ‘with interest’. De Castro argued that ‘the future of public support is in risk management tools, more than in direct payment schemes’. He felt that ‘new and flexible tools’ were needed to protect farmers from volatile markets and extreme weather events and that ‘in this regard, the debate in the US seems to be more advanced that the one in the EU’”.
And, a news release yesterday from the National Farmers Union (NFU) indicated that, “The [NFU] Board of Directors passed a resolution today urging Congress to pass a comprehensive, five-year farm bill by the end of 2012 as part a legislative package to avoid the proverbial fiscal cliff. The 2008 Farm Bill expired on Sept. 30.”
University of Illinois Agricultural Economist Darrel Good noted yesterday at the farmdoc daily Blog (“Will Corn and Soybean Prices Return to Pre-Drought Levels?”) that, “March 2013 corn futures dropped below $5.50 in early May 2012 and were drifting lower when U.S. drought conditions turned prices higher starting in mid-June. The price of that contract peaked in early August, just short of the $8.50 mark. March 2013 soybean futures dropped below $11.50 in December 2011before South American drought conditions and then U.S. drought conditions sent that contract above $17.25 by mid-September 2012.
“Corn prices have declined by more than $1.00 since the late summer peak, while soybean prices have declined by more than $3.00. The general expectation has been that prices of both commodities would return to pre-drought levels as early as 2013 as consumption adjusted to the lower supplies and as production rebounded in both South America and the U.S. The futures market currently reflects expectations that corn prices will moderate substantially from current levels by the fall of 2013 as larger crops are harvested in Argentina and then in the U.S. December 2013 futures, for example, are priced $.95 below December 2012 futures. The soybean market expects prices to moderate from current levels by the summer of 2013 as a large South American crop is harvested. August 2013 futures prices are nearly $.60 lower than March 2013 prices. Further price reductions are expected into the fall of 2013 as a larger U.S. crop is harvested. November 2013 futures are about $0.85 below the price of August 2013 futures. Still, the prices of both commodities for delivery in the 2013-14 marketing year are well above the levels prior to the drought of 2012.”
After additional analysis, yesterday’s update indicated that, “There is a relatively high probability of large crops, increasing stocks, and lower corn and soybean prices in the 2013-14 marketing year. Such a probability might warrant some aggressive pricing of next year’s production. However, current tight supplies and production uncertainty are expected to keep prices relatively high in the early part of the new year. If that is the case, the spring price guarantees for crop revenue insurance could once again be at very high levels, offering protection from low prices that would result from large crops.”
Ian Berry and Kelsey Gee reported yesterday at The Wall Street Journal Online that, “In an age of vitamin waters and energy drinks, the decadeslong decline in U.S. milk consumption has accelerated, worrying dairy farmers, milk processors and grocery chains.
“The industry ‘is coming to recognize this as a crisis,’ says Tom Gallagher, CEO of Dairy Management Inc., a farmer-funded trade group that promotes milk products. ‘We cannot simply assume that we will always have a market.’
“Per-capita U.S. milk consumption, which peaked around World War II, has fallen almost 30% since 1975, even as sales of yogurt, cheese and other dairy products have risen, according to U.S. Department of Agriculture statistics. The reasons include the rise in popularity of bottled waters and the concern of some consumers that milk is high in calories (see related graph from article).”
Jack Healy reported in today’s New York Times that, “But over the last few years, skyrocketing costs, a brutal drought and plunging lamb prices have battered [Colorado rancher John Bartmann] and the 80,000 ranchers across the county who raise sheep — from a few to several thousand. It is the latest threat to shadow a Western way of life that still relies on the whims of summer rains, lonely immigrant sheep herders and old grazing trails into the mountains.
“‘For the sheep industry, it’s the perfect storm,’ Mr. Bartmann said, glancing out his office window here at a bleating sea of wool. ‘The money is just not there.’
“Many ranchers are laying off employees, cutting their flocks and selling at a loss, and industry groups said a handful had abandoned the business entirely. Mr. Bartmann has trimmed his flock of 2,000 by one-third. With prices down more than half since last year and higher costs for gasoline and corn, Mr. Bartmann said he expected to lose about $100 for every lamb he sold.”
Over the weekend, USDA issued a statement titled: “United States Agriculture Secretary Tom Vilsack and United States Trade Representative Ron Kirk Call on Russia to Suspend its new Testing Requirements for U.S. Meat Exports to Russia.”
Article printed from FarmPolicy: http://farmpolicy.com
URL to article: http://farmpolicy.com/2012/12/11/budget-estate-tax-farm-bill-ag-economy-and-trade/
© 2011 Farm Policy. All rights reserved.