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Petition Challenges Nebraska
Corporate Tax Incentives
Hard times require sacrifice. But
sacrifice must be fairly shared.
The beneficiaries of Nebraska’s corporate job creation incentive program (LB
775) have not shared in the sacrifice to address the state’s budget crisis. Some
of Nebraska’s largest and most profitable corporations are still paying no state
income taxes. At least we have reason to believe they pay no income taxes.
We cannot prove it because the most expensive economic development program in
the state’s history is shrouded in secrecy. The state does not disclose the LB
775 tax subsidies it provides. Its proponents have fended off efforts to require
public disclosure.
Corporate tax subsidy proponents have blocked all reforms. They have defeated
job quality screens that would limit subsidies to jobs that meet pay and benefit
thresholds. They have defeated efforts to defer some of the benefits, to raise
application fees for subsidy recipients, and to budget and cap the amount of
money spent on the program. |
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Improving Crop Production through Soil Microbiology
will be held on November 25 at the Ag Research and Development Center just
South of Mead, Neb. Registration begins at 9:00 a.m. with the program
wrapping up at 3:30 p.m.
The workshop’s focus is the value of soil microorganisms to the quality
and fertility of the soil. Dr. Rhea Driber, University of Nebraska Soils
Specialist and an expert in Soil Microbiology will be the featured
speaker.
Other topics include the value of cover crops; the value of soil organic
matter; the value of rotation of crops for increased soil fertility; and,
finally, a discussion on soil quality indicators.
For more information, contact Jim Peterson at the Washington County
Extension Office in Blair NE, 402.426. 9455 or
jpetersm@unlnotes.unl.edu
Is it possible to get started in farming and ranching
today? Learn about the practical opportunities available for getting
established on the land at a special conference Saturday, March 27, from 9
a.m. to 5 p.m., at the Holiday Inn and Convention Center in Kearney, Neb.
Beginning Farmer and Rancher Conference: Realities and Opportunities will
focus on practical ways of minimizing the risks of starting a farm or
ranch. Presentations will include generational farm transfer, start-up
programs, risk management, financials, sharing expenses and equipment, and
legal issues.
The conference is sponsored in partnership by the Center for Rural
Affairs, the Land Stewardship Project, the University of Nebraska, and
USDA’s Risk Management Agency. For more information, contact Joy Johnson,
joyj@cfra.org |
By blockading reasonable and needed reforms, LB 775 proponents have
fostered a growing and festering resentment that is coming back to bite them.
Nebraskans for Peace and The Nebraska Association of Public Employees have
launched a petition drive to end the program for future applications. Tax
subsidies already committed would be paid in full – in some cases over the
next 10 to 15 years.
We are reluctant to embrace the call for the elimination of job creation tax
incentives. They are probably a necessary evil until all states get together
to cut them jointly. But for one state to ban them while all others keep them
would likely cost jobs.
Nonetheless, we say sign this petition. This program badly needs to be
reformed. And since its proponents have stonewalled all reform efforts in the
Legislature, a petition drive is a logical means of forcing a broader public
debate on long overdue reforms. Needed reforms include:
Tax subsidies should be provided only for creation of quality jobs that
meet minimum standards for pay and benefits. We should not subsidize large
corporations to take advantage of hard working people and burden communities
with the social costs of an underpaid workforce.
The Legislature should budget and cap the amount spent on LB 775 tax breaks
and balance it with expenditures on small business, cooperative and community
development. Such entrepreneurial development should get at least 25 percent
of economic development spending. But just the opposite has happened. Ninety
percent of state spending on entrepreneurial-based rural development has been
cut in the wake of the state budget crisis, while corporate subsidies remain
untouched.
The state should disclose information to the public on the subsidies
provided through LB 775, just as it does on other programs.
Perhaps most needed at this time of budget crisis is a change not to LB 775
itself but to the larger state tax structure. It is time for Nebraska to
establish a corporate minimum tax – much like the federal corporate minimum
tax – that requires all profitable corporations to pay some state income tax.
That would restore a portion of the revenue shortfall in our state budget and
begin to restore an element of fairness to our tax system.
Most important, it would establish the principle that every profitable
corporation doing business in our state has an obligation to contribute to the
education of our children and public services. Only if we all contribute
something to the common good, can Nebraska be the kind of state where people
want to live and companies want to do business.
Contact: Chuck Hassebrook,
chuckh@cfra.org.
Specifics of LB 775 Law
The Employment and Investment Growth
Act, a/k/a LB 775, was adopted in 1987 and provides sales, income, use, and
property tax refunds and credits to qualifying businesses and individual
owners, shareholders, partners, and members for qualifying business activities
under three options:
- $20 million net gain in investment, OR
- $3 million in investment and 30 new full-time
equivalent employees, OR
- $10 million in investment and 100 new
full-time equivalent employees.
Qualifying business activities include research
and development, data processing, telecommunications, insurance and financial
services, manufacturing, and transportation. Production agriculture and most
retail and service businesses do not qualify.
Get a Rural Perspective on the Nebraska
Legislature
The Center will again be providing our annual free Nebraska Legislative Update, a weekly
email analysis of the bills, hearings, and other
happenings taking place in the Nebraska Unicameral. Author Jon Bailey puts the
rural action in focus and outlines all the week's major legislative
developments. It couldn't be easier to keep informed; research and analysis
delivered right to your mailbox each week. To subscribe, send an email to Jon Bailey at
jonb@cfra.org and ask to be added to the
mailing list.
Senate Blocks
Payment Limits
As we go to press, Southern leaders in the
United State Senate have engineered an extraordinary political maneuver to
block a vote on farm program payment limitation reform.
Throw out your civics textbook that says all bills must come before the full
House and Senate for debate. The Senate agriculture appropriations bill will
more than likely not go to the full Senate for consideration.
Rather, it will go direct from the Senate Appropriations Committee to the
conference committee, where differences are worked out with the House bill.
Even if it should go to the floor before going directly to conference
committee, Senate sources say the farm program payment limitation amendment
will not be allowed a vote.
Iowa Senator Chuck Grassley had pledged to offer an amendment to cap payments
to large farms when the appropriations bill came before the full Senate. Big
farm interests knew they did not have the votes to stop him, so they blocked
the vote by preventing the bill from ever coming before the full Senate.
Grassley’s payment limitation amendment to the farm bill last year won the
support of two-thirds of Senators.
Grassley has pledged to continue his efforts until meaningful payment
limitation reform is passed. Growing and vocal grassroots support is building
momentum for reform.
Contact: Chuck Hassebrook,
chuckh@cfra.org or
402.846.5428 x 28 for information.
Role of
Community Organizing in Strengthening Rural Communities
Giving people the power of working together to
solve problems is the essence of community organizing – inclusive, open, and
broad processes fuel positive results.
Most small, rural communities are in a state of crisis. Massive out migration
and an aging population, along with technology, have made relational interaction
virtually impossible. People no longer work together to solve their problems.
Technology has played a role in transforming the rural economy into part of the
global economy. The positive side of technology is that people in small rural
communities are no longer as tightly bound by geographical limitations for
economic reasons. The negative implication is that people are losing the ability
to build relationships locally.
Community organizing simply means getting people to work together to get things
done. It is a value-based process, and it requires bringing people to the table
who were previously not present in making key decisions.
Community organizing often tries to correct an imbalance of power. It has been
an effective means for poor and disadvantaged people to determine for themselves
the actions to take to solve problems that particularly affect them. They no
longer need to be the passive recipient of power held by others.
So how does building power and creating change work in modern society and in
particular, in small rural communities?
Normally, community organizing draws its strength from the democratic process of
inclusiveness of the disadvantaged and poor. In our modern society, small rural
communities, as a whole, are the disadvantaged. In many cases they also
represent the poor as well.
While community organizing in urban settings may bring a neighborhood together
to pursue social change, small rural towns must battle on two fronts:
- They must organize together to include all of their citizens through a
participatory and inclusive process.
- They must also look at their community much more broadly and organize
power to bring the larger regional base of people living in small towns
together to affect change. The definition of community must be much wider.
Community organizing has the ability to increase small rural community
control to improve political effectiveness, quality of life, and social justice
through the process of building power.
As Nebraska begins the debate over tax incentives and how they are used to
attract job growth in our state, it may not hurt for legislators to look at
economic gardening and work more closely with our entrepreneurial assets to save
our small communities. In the long run, it is a win-win situation for everyone.
Contact: Michael L. Holton,
michaellh@cfra.org for more information
on community revitalization.
Corporate Farming Notes
Smithfield expands pork presence, Midwest
protections now critical; Monsanto cuts workers; and Bush administration sends
help.
First, the Justice Department ruled to allow the sale of Farmland
Industries Inc.’s pork business, rejecting the argument of Sens. Grassley (R-IA)
and Johnson (D-SD) that whoever buys it will be closer to a monopoly of the pork
industry. Then four days later Smithfield Foods Inc. outbid Cargill to own it.
Smithfield will pay $367.4 million in cash for almost all the assets of the
Kansas City, Mo., company’s pork division, Farmland Foods. It also will assume
$90 million in pension obligations, boosting the combined value of the bid to
$457.4 million.
Adding even more Midwest packing plants to those owned by the nation’s most
aggressive integrator (already number one in both pork production and packing
before the purchase), clearly displays how critical our region’s anti-corporate
farm laws are.
Where in other areas of the country Smithfield has easily isolated their packing
houses’ supply to their own production, laws like I-300 ensure that independent
producers can still sell into the formerly-Farmland plants.
Without such provisions assuring that a free market exists, the competitive
capitalist system would be still further removed from the agricultural industry.
Agriculture biotechnology leader Monsanto Co. reported a wider
fourth-quarter loss, citing a charge tied to its contribution to a settlement
over PCB contamination in Alabama. The company also said it planned to cut as
much as 9 percent, or about 1,200 jobs, of its global work force.
The St. Louis-based company said it lost $188 million, or 72 cents per share,
for the three-month period ending Aug. 31, compared with a loss of $27 million,
or 10 cents a share, during last year’s fourth quarter. –
Associated Press
The Bush administration just adopted a new policy that will prevent
farmers from suing the manufacturers of insecticides and herbicides. The
administration’s position change is based on a reinterpretation of the Federal
Insecticide, Fungicide and Rodenticide Act.
The act directs EPA to set label requirements for farm chemicals and bars states
from setting stricter labeling rules. Now farmers will not be allowed to sue
manufacturers for damages if crop destruction occurs when they correctly follow
the label directions. – USA Today
Contact: Brad Redlin at
bradr@cfra.org or
402.846.5428, extension 24.
Conservation Security Program Update
At this writing we are still waiting for USDA to publish the proposed rules
and regulations for the Conservation Security Program (CSP). We expect them very
soon.
The CSP is a new program intended to reward farmers for excellent environmental
stewardship. It has the potential to deliver long-term benefits to the nation in
terms of cleaner water and air and expanded wildlife habitat.
The proposed rules and regulations often define how a program will be
administered even though they are not final. A public comment period is required
on proposed rules, and listening sessions are sometimes held as well.
It is critical to get citizen input into the process so that USDA understands
there is broad support around the country for implementing the new program as it
was intended.
If you would like to be placed on our informational and action alert list for
the CSP, contact Traci Bruckner,
tracib@cfra.org or 402.846.5428, x 21.
New Appointments Announced to
Federal Advisory Committee
Some names familiar to the Center are among USDA’s recently announced
20-member Advisory Committee on Beginning Farmers and Ranchers.
The committee advises the Secretary of Agriculture on ways to encourage federal
and state beginning farmers’ programs to provide joint financing to qualified
farmers and ranchers and look for methods to help create new farming or ranching
opportunities.
Appointees are listed below. Those who work with beginning farmer programs we
are familiar with are italicized.
- Terry Barta of Smith Center, Kan.
- Marian Beethe of Tecumseh, Neb.
- Marion Bowlan of Manheim, Pa.
- Valerie Diller of Texline, Texas
- Henry English of Pine Bluff, Ark.
- Omar Garza of Santa Elena, Texas
- Juan Guzman of Miami, Fla.
- John Hays of Washington, DC
- J. Latrice Hill-Moore of Jackson, Miss.
- Ferdinand Hoefner of Washington, DC
- Todd Lang of Strasburg, N.D.
- Trenton McKnight of Throckmorton, Texas
- Ray Mobley of Tallahassee, Fla.
- Nancy New of Syracuse, N.Y.
- Linda Prentiss of Springville, Calif.
- Hazell Reed of Dover, Del.
- Kathryn Zuelzer Ruhf of Belchertown, Mass.
- Wayne Soren of Lake Preston, S.D.
- Dave Stille of Bloomington, Ill.
- Kenneth Stokes of Stephenville, Texas
- David Wirth of Springfield, Ill.
Contact: Joy Johnson,
joyj@cfra.org for more information
on the advisory committee.
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Feature article:
Strategies to Revitalize Rural America: The
Role of State Policy
This is the seventh and final article in a
series by Chuck Hassebrook on our strategies for rural community revitalization.
The series is available as a
booklet on our website (pdf format) or for $5.00 from the Center's office
(contact Rita, 402.846.5428).
State policy can be a powerful force for
economic development that builds strong rural communities and creates genuine
economic opportunity for people.
It is more difficult in the midst of today’s state budget crises. But it’s not
impossible. States must make the commitment to sustain the most important
programs for rural revitalization. That sometimes requires a willingness to
balance spending cuts with tax increases. And it requires a willingness to
scrutinize the use of every dollar available to community and economic
development to ensure limited dollars are used in the best way possible.
One place to start is by making common sense reforms in corporate job creation
tax subsidies – reforms that could generate substantial savings to reinvest in
rural revitalization. States can budget and cap the amount spent on job creation
tax subsidies.
States can cut the costs of such programs by imposing job quality requirements
on beneficiaries and denying subsidies for poor jobs. In addition, a corporate
minimum tax would raise revenue and ensure that all profitable corporations –
including those receiving job creation tax subsidies – contribute something to
educating kids and providing vital services.
The revenue raised could be used to balance corporate job creation incentives
with investments in more entrepreneurial development approaches that work in
rural communities – small business, cooperative and grassroots leadership
development. Key approaches include:
- Microenterprise development programs provide
grants to programs that provide loans, training, technical assistance, and
market development assistance to new and established owner operated
businesses, typically with five or fewer employees. Studies have demonstrated
that microenterprise development programs create jobs at a fraction of the
cost of corporate job creation tax subsidies.
- Agricultural development programs provide
funding and technical assistance for cooperatives and new market development
initiatives. There are growing opportunities in higher value products –
natural meats, local foods, and other niche products. But family farmers and
ranchers must develop new cooperatives and markets to capture those
opportunities. Criteria for awarding funds should favor projects that increase
the farm and ranch share of food system profit, increase self employment
opportunities in farming and ranching, and strengthen small and mid-size
operations. Without such criteria, agricultural development programs can
easily turn into subsidies for corporate farming and agribusiness development.
- Grassroots Leadership and Community
Development – Community revitalization starts at the grassroots. Community
members must come together, develop their leadership skills, and build
consensus and commitment on moving forward in securing their future. States
can provide seed funding for technical assistance and training to help
communities make it happen and provide the impetus for neighboring communities
to band together to make their efforts more effective. The emphasis should be
on initiatives that engage the whole community from the grassroots up.
- Individual Development Accounts are public or
privately matched small savings accounts that can only be used for home
ownership, small business development, or higher education. They help people
build long-term economic well-being by building assets through home ownership,
business ownership, or enhanced education. Asset building provides important
psychological and social effects that cannot be achieved by simply increasing
income. It gives people a stake in their community and encourages them to take
responsibility for its future. States that appropriate funds for individual
development accounts for low and moderate-income people can gain federal
matching funds.
Tax Incentives for Rural Development
States can also shape their tax policy to foster the small entrepreneurial
approaches that work in rural communities. Few existing businesses tax
incentives are designed for the small start-up operations. That could be
changed. States could provide an investment tax credit for starting or expanding
owner-operated businesses with five or fewer employees.
That concept is embodied in proposed federal legislation – the New Homestead
Opportunity Act introduced by Senators Byron Dorgan (D-ND) and Chuck Hagel
(R-NE). It would provide a tax credit equal to 30 percent of the money invested
by an individual in starting or expanding their own small business. The maximum
tax savings would be limited to $25,000 over five years. The Act has not passed.
This approach could be adopted by states.
Property tax relief can be designed to strengthen small and medium-size farms
and ranches and thereby open opportunity to more beginners. For example, states
could provide income tax credits when property taxes on owner-operated farmland
take an excessive share of the operator’s income. By limiting the relief to a
modest amount of land, such a provision could target relief to smaller and
beginning farmers and help them compete for land with larger operations.
Maintaining small and mid-size farms and increasing the number of beginners is
rural development.
Such an “owner-operator tax credit” could be combined with a similar tax credit
for modest income homeowners – both rural and urban. That might give it the
votes to pass in legislatures that rarely have the rural votes to pass property
tax relief targeted only to farmers and ranchers.
Tax credits can also provide incentives for landowners to rent land to beginning
farmers. The Nebraska Legislature created a program to provide a tax credit to
landowners who rent land to beginners for a share of the crop. Share rents
substantially reduce the capital requirements of getting started, and they
provide a means for the landlord to share some of the risk of falling prices and
crop failure. The tax credit can offset the risk that a landowner assumes in
share renting land to a beginner.
Such incentives can be broadened beyond farming and ranching to also encourage
innovative and favorable leases of existing non-farm businesses to new
operators. Many rural business people are nearing retirement. Incentives for
them to transfer their businesses to a new generation could make a critical
difference in determining whether businesses are shut down and their assets
sold, or new families are offered the opportunity to start businesses and lives
in rural communities.
Finally, the tax code can provide incentives for charitable giving in support of
community development. Many rural retirees hold substantial assets and are in a
position to give back to their community. The state of Montana provides income
tax incentives for people to donate to community foundations and other nonprofit
charitable initiatives to foster community development and community
institutions. It is estimated to have created $74 million of endowment for
community development over five years at a cost of $24 million.
Boost Renewable Energy Opportunities
Renewable energy production offers rural communities the chance to become energy
producers, rather than energy importers. Recent reductions in the cost of wind
generation of electricity combined with federal tax credits open opportunities
on the windswept plains. State policy-makers can give a boost to wind energy
development by establishing a requirement for the minimum percentage of a
state’s electricity that must be generated from renewable sources.
In Nebraska, the Legislature may need to revise its longstanding policy of
requiring public power producers to provide power at the lowest cost possible,
to allow environmentally friendly alternatives that support community
development. Other states have adopted tax credits and public funding for
generating electricity from renewable resources.
States also have numerous tools to promote development of liquid fuels from
biomass, including providing incentive funds for developing biofuel projects and
requiring that service stations sell gasoline that includes biofuel blends.
Encourage E-Business over the Internet
States can act to overcome the digital divide – to ensure that rural people have
access to high-speed Internet service. The policy options are too numerous and
complex to discuss here. New technological developments are reducing, though not
eliminating, barriers to quality Internet service in rural areas.
The key rural development challenge is ensuring that rural businesses are able
to use the full potential of the Internet to sell in large, distant markets. The
initial impact of the Internet may be more negative than positive for rural
economies by enabling distant retailers to penetrate rural markets formerly
controlled by rural businesses. States should consider options for funding or
directly providing technical assistance to rural businesses on how to use the
Internet to its full advantage in reaching new, distant markets.
Distribute State Job Locations
State expenditure is a powerful driver of economic development. Where the state
spends, the economy grows. Typically, state expenditures are concentrated in the
capital city and metropolitan centers. But states can establish explicit
policies to distribute state jobs and money to rural areas when feasible.
Contact: Chuck Hassebrook for more
information on our strategies for rural communities,
chuckh@cfra.org or 402.846.5428 x 28.
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Beginning Farmers and Ranchers and
Initiative 300
Case1 in our series examining the
nation’s strongest anti-corporate farming law, we look at the facts about
beginners in Nebraska.
Those who seek to modify Initiative 300 say it interferes with opportunities for
beginning farmers and ranchers and needs to be modified to free up those
opportunities.
Let’s take a look at the facts.
Between 1982 and 1997 (the last agricultural Census data available), farmers and
ranchers under the age of 35 declined by 60 percent in Nebraska – comparable to
Midwestern states with or without anti-corporate farming laws.
Iowa, Illinois, and Minnesota were slightly higher (ranging from 63 to 66
percent). Kansas and South Dakota were slightly lower (ranging from 57 to 59
percent).
In 1997, 11 percent of Nebraska farmers and ranchers were under 35, 42 percent
more than in the United States as a whole and more than in Iowa, Illinois,
Kansas, and Missouri.
Research by the USDA Economic Research Service showed that in the five years
after I-300 was adopted, Nebraska had the smallest decline in the number of new
people entering agriculture of any state.
Blame prices, blame rates of return, blame other opportunities for the decline
in beginning farmers and ranchers, but I-300 is not the culprit.
Opponents of I-300 also ignore the myriad ways beginning farmers and ranchers
can enter agriculture under the current law.
Creation of a family farm corporation by an older farmer with a related
or unrelated beginning farmer as a minority shareholder, who, over time,
acquires majority control of the corporation’s assets. The family must hold
majority control of the corporation and provide day-to-day labor and management.
But even after retirement of the older farmer, under I-300 the corporation has
50 years to re-qualify as an exempt corporation thus allowing the beginning
farmer sufficient time to acquire the assets and reorganize.
Use of contracts, leases, and partnerships between older farmers and
beginners. Examples abound in those who have worked with the Center’s Land Link
program.
Enhancing the profitability and financial attractiveness of agriculture through
credit and tax reforms, farm program reforms, value-added opportunities, and
marketing programs will do more to increase the number of beginning farmers and
ranchers than any change to I-300.
Those who profess to care about beginning farmers and ranchers should embrace a
policy that affords opportunities for independent farmers and ranchers, and
should look for ways to work with the current law rather than misrepresent it
and call for its modification to make Nebraska agriculture more “corporate
friendly.”
Contact: Jon Bailey,
jonb@cfra.org or 402.846.5428 x 26.
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