The Data is Conclusive: Farm Bill Reform is Phony Reform
Here's why. Under current law, mega farms get double the $40,000 direct payment limit by using either the three entity or spouse rule. They cannot use both. They can only double. The conference agreement eliminates the three entity rule as a means of doubling by attributing all payments to the ultimate recipient. But it leaves the spouse rule intact and raises the nominal limit on direct payments from $40,000 to $50,000.
The net effect is to reduce the limit on direct payments from $80,000 to $50,000 for widows and bachelors, but increase it for married mega farmers from $80,000 to $100,000. Call it the Norwegian bachelor farmer payment limitation.
Adjusted Gross Income Limits - Much Ado About Little
Senator Chuck Grassley's analysis of U.S. Internal Revenue Service data revealed that from 36 to 41 percent of those who would lose farm payments under the House, Senate and Administration means test proposals were landlords. They will continue to enjoy the benefits of full farm payments by switching to cash rent arrangements. Their tenants will collect the federal payments and pass them on in the form of top dollar cash rents.
As for denying payments to high income farmers, Secretary Schafer got it right when he said recently that "If there is a farm in America that can't meet a $500,000 hard cap, they need a new accountant."
The so called $500,000 hard cap advocated by Schafer would in reality be a $1 million means test for couples. The number in the conference agreement is unclear but will likely be higher. Large farms that approach the income limit will get around it by purchasing land and expanding - increasing interest, depreciation and input deductions.