System would pay larger-scale farmers less

By Matt Bewley | The Daily Journal

Published Thursday, April 12, 2007

Larger Minnesota farmers would be allocated less money under a new Commodity Payment System proposed by the U.S. Department of Agriculture (USDA), announced Tuesday by Agriculture Secretary Mike Johanns.

The USDA’s proposed changes to the 2002 farm bill are broad-based in scope and subject, covering topics like conservation, rural development, nutrition and energy.

“Another of the major initiatives of our farm bill proposals is aimed at reforming our Title I support programs for commodity crops,” he said. “We want to make these programs more efficient. The taxpayers have a right to demand that. And we want them to function well as safety nets, as they were designed to be.”

Congressman Collin Peterson (D-Minn.), chairman of the House Agriculture Committee, welcomed the USDA’s proposals.

“We appreciate the USDA’s input on the next farm bill and hope the language that the USDA plans to provide will offer more details related to their proposals,” he said. “Their ideas will certainly be considered along with other proposals as the House and Senate Agriculture Committees write the next Farm Bill.”

Created during the depressed-ridden 1930s to provide supplemental income for small producers, the Commodity Payment System has since become a boon to all farms, large and small.

To receive commodity payments under the proposed plan, producers must earn less than $200,000 in adjusted gross income (AGI), which includes wages and other income minus farm expenses and depreciation. This plan reduces the AGI limit from the previous $2.5 million. If a producer has an annual adjusted gross income of $200,000 or more, that individual would no longer be eligible for commodity payments.

The Administration's farm bill proposal also recommends repealing a provision of current law that waives the AGI limit if 75 percent or more of the AGI is derived from farming, ranching or forestry activities.

Internal Revenue Service (IRS) data for 2004 indicate that 97.7 percent of all American tax filers have an AGI under $200,000.

Internal Revenue Service (IRS) data for 2004, the most recent data available, indicates that only 2.3 percent of all American tax filers have an AGI of $200,000 or more. The data also indicates there were 38,000 tax filers who had an AGI of $200,000 or more and received farm program payments. These 38,000 tax filers received 4.9 percent of all farm program payments or approximately $400 million.

Because the Administration's proposal is based on a three year average of AGI, the number of tax filers affected may vary from the number of tax filers with an AGI of $200,000 or more in any single reporting year.

Congress periodically re-authorizes a variety of farm and food laws through a multi-year, omnibus farm bill. An omnibus bill packages together several measures and/or diverse subjects into a single bill. The current Farm Bill is called the “Farm Security and Rural Investment Act of 2002.”

Since 1985, farm bills have been drafted as five-, six- or seven-year bills. Because many of the provisions of the 2002 farm bill expire in 2007, re-authorization is now being addressed.