We’re going to stop complaining about the House farm bill. We have to move on with our lives. We can’t hold onto this anger forever. We have to look to the future, right? And no matter how attached we are, we said we would, so we should.

But it provides such great blogging material, so please permit us one last rant.

There has been extensive talk about the adjusted gross income limit in the House farm bill. This is usually referred to as means testing. The AGI limit is lowered in the House version of the farm bill, and many representatives have said that this is real reform. That it will make a big difference. It won’t.

It works like this in the House farm bill: If your AGI is greater than $500,000 but less than $1,000,000, you are ineligible for farm program checks, unless 2/3 (or more) of your income is from farming. If your AGI is over $1,000,000, you are ineligible for farm programs period, no matter how much of your income is from farming. (In the 2002 bill, the AGI limit is $2.5 million, unless 3/4 of your income is from farming, in which case there is no AGI limit at all). At the end of the day, the AGI limit is basically irrelevant, and here’s why.

There are countless ways to reduce AGI through various tax deductions and accounting gimmicks. Money spent on machinery, for example, can usually be deducted from your AGI. Have an AGI of $1.2 million? Buy a $300K combine, and you’re good to go. You can move losses around from one year to the next to lower AGI. You can deduct the mortgage interest on purchased land. And if you’re married the House farm bill limit is actually doubled to $2 million. Moreover, this provision could drive wealthy landowners who now share rent land (a good thing) to cash rent (boo).

We could go on and on. Lots of people think that farm programs are easy to game; an AGI limit is much easier. The Mulch Blog has analyzed this in even more detail here and here. Means testing, by itself, simply does not work to prevent extremely large farm program checks, or the sending of farm program checks to those who do not truly need them. With the right lawyer and/or accountant, the AGI limit is meaningless.

Ironically enough, the chairman of the House Agriculture Committee, Rep. Collin Peterson, knows this as well as anyone. Last February, the Bush administration proposed a $200,000 AGI limit on farm program participation. (Heck, we wrote way back then that it wouldn't work). Before he introduced his own, much higher AGI limit proposal in July, Rep. Peterson had much to say about the administration’s proposal and the subject of means testing in general:

But many lawmakers remain skeptical of means tests for the subsidies.

"Some people are fixated on this," said Rep. Collin Peterson (D-Minn.), chairman of the House Agriculture Committee. "It would be good for lawyers and accountants. I don't know if it's good for anyone else." - Chicago Tribune, June 2007

Peterson said he has doubts about another USDA proposal, a means test that would ban commodity program payments to anyone with more than $200,000 in adjusted gross income. As a CPA, he said he knows there are ways to manipulate that. - Successful Farming, February 2007

While Johanns has continued to defend means testing as a “fairer” approach to distributing farm program payments, members of Congress, including House Agriculture Committee Chairman Collin Peterson, have scoffed at the idea saying implementing the proposal could be “problematic.”

“There’s some question about what happens when a producer drops below $200,000 in adjusted gross income when he’s no longer eligible for farm program payments,” said Peterson, a certified public accountant before he came to Congress. “Some of us aren’t sure how the limit could be made to work.” - Delta Farm Press, July 2007

And on the administration’s $200,000 limit proposal, Rep. Peterson shows he understand the political appeal of a stricter AGI limit:

He’s concerned how the proposal will play outside the committee. “If this gets to the floor, a lot of people won’t understand all the implications,” he said. “I have to give the secretary credit for coming up with the proposal because it sure sounds good.” - Delta Farm Press, March 2007

Well, that’s pretty much what we would say about the House farm bill AGI limit. It sure sounds good.

As Chairman Peterson says, someone making $201,000 can certainly afford a decent lawyer or accountant to get around the administration’s proposed $200K AGI limit. Well, then surely someone making $1 million can afford an even better lawyer to get around the AGI limit in the House farm bill. Maybe a team of lawyers. And maybe this is why you don’t hear the Cotton Council and Rice Federation complaining about an AGI test. They are perfectly aware it is meaningless.

Now we’re done with the House. We promise. Next up will be a rant on the Senate; California Dreamin’.