Washington Insider - Monday

Tax Proposals and Class Warfare

Here’s a quick monitor of Washington farm and trade policy issues from DTN’s well-placed observer.

Group of House Democrats unveil 'Food and Farm Act'

A bill that would make major changes to U.S. farm policy, the Farm and Food Act, was introduced November 16 by Rep. Earl Blumenauer, D-Ore., with an eye on next year's Farm Bill.

Other lawmakers supporting the bill include Reps. Rosa DeLauro of Connecticut, Chellie Pingree of Maine, Marcy Kaptur of Ohio, Tim Ryan of Ohio, Don Beyer of Virginia, and Peter Welch of Vermont. "We have not had a comprehensive piece of legislation that talks about what a farm bill would look like if it was written for Americans who eat, who breathe, who care about nutrition," Blumenauer told reporters as he unveiled the legislation. "For the sake of our farmers, planet, fiscal sanity, and our health, we can't afford to continue the status quo," he added.

The measure proposes the elimination of the Agriculture Risk Coverage (ARC) and the Price Loss Coverage (PLC) programs. It also looks to limit the subsidies received by individual farmers or agribusinesses across commodity, conservation, and crop insurance programs to $125,000 per year.

Warnings on PAYGO Impacts to Farm Programs Likely Overblown

Some Democratic lawmakers, a National Farmers Union official and others have warned the Republican tax-reform plan could devastate U.S. farm programs.

Those citing that concern are noting a Congressional Budget Office (CBO) analysis in their warning that the increase in the federal budget deficit allowed by the GOP tax proposals could devastate farm programs. The CBO analysis concludes the programs subject to the automatic cuts are not large enough to accommodate the $136 billion in cuts that would have to be made. “That would be a disastrous trade,” said National Farmers Union (NFU) President Roger Johnson.

As for those contentions that the PAYGO requirements could have a major impact, House Ag Chairman Mike Conaway, R-Texas, said while spending cuts would be “devastating,” he was confident Congress would waive the budget rules. That is what Congress has done many times, both those led by Republicans and Democrats.

Since its enactment in 2010, Congress has waived Statutory PAYGO requirements 29 times in which the budgetary effects, in whole or in part, were excluded from the PAYGO scorecards, according to a Congressional Research Service memorandum. And, both political parties have waived PAYGO when they have been in the majority, and it’s been waived with bipartisan majorities, and often times by unanimous consent.

Based on history, Republicans feel that this should be a perfunctory exercise.

Washington Insider: Tax Proposals and Class Warfare

The proposed tax bills are highly complex, and have a long list of winners and losers, The Hill is reporting this week. What that means exactly is not so easy, since it depends on where you sit on the issues.

The Hill says Democrats have been “forcefully and repeatedly” arguing that the GOP wants to cut taxes for wealthy individuals and corporations at the expense of everyone else. Republicans, annoyed with the attacks, continue to push back claiming that their focus is the middle class—both with mixed success.

The issue came to a head—sort of-- late Thursday after Senate Finance Committee Chairman Orrin Hatch, R-Utah, blew up following an argument by Sen. Sherrod Brown, D-Ohio that the bill is geared toward the rich.

“I really resent anybody saying that I’m just doing this for the rich. Give me a break…I think you guys overplay that all the time and it gets old, and frankly you ought to quit it,” he said.

All this is nothing new, The Hill said. GOP lawmakers highlight elements of their bills they say benefit the middle class, including the increases in the standard deduction and child tax credit. The Senate bill ends the Affordable Care Act’s individual mandate penalty for those who don’t have health insurance, and Republicans claim their bill is designed to make U.S. businesses more competitive with companies in other countries, and will lead to rising wages and job growth.

But Democrats argued that the corporate tax cuts are more likely to benefit wealthy shareholders than workers. They highlight parts of the bills that seem to help the rich, such as their scaling back of the estate tax and the repeal of the alternative minimum tax. They have also put a spotlight on tax breaks benefiting the middle class that would be eliminated.

And, they point to CBO estimates that show the legislation could increase the deficit and could trigger automatic cuts to Medicare unless certain budget rules are waived.

Both sides use data from Congress’s tax scorekeeper, the Joint Committee on Taxation, to make their case. For example, Republicans have pointed to data that shows people across the spectrum would win tax cuts from the plan, particularly in the short term, while Democrats have highlighted that millions of low- and middle-income families would see their taxes go up, especially in future years.

The Joint Committee on Taxation found that under the Senate’s bill, in 2027 those making less than $75,000 would see their taxes go up on average, since the measure’s tax cuts for individuals expire after 2025.

While Republicans say they would plan to extend those tax cuts in the future, Democrats are furious that the GOP chose to make individual tax cuts temporary while making corporate tax cuts permanent.

In addition, many polls have shown weak support for the GOP’s tax plans, so Democrats view taxes as a winning issue for them. “The tax bill is a political minefield for the Republicans,” Democratic strategist Brad Bannon said. He argues that Democrats should “go to town” with attacks on the GOP tax bills given their unpopularity. “If somebody gives you a gift, and you don’t take it, you’re crazy,” he said.

But Republicans see political benefits, and they are eager to show voters that they can enact major legislation ahead of the midterm elections.

“You don’t want to leave an argument, no matter how ridiculous, unchallenged,” said Americans for Tax Reform President Grover Norquist and some conservative groups have criticized Republicans for some of their measures that are designed to keep the tax code progressive.

The Club for Growth and Americans for Prosperity supported the overall tax bill that the House passed on Thursday, but criticized it for keeping the top individual tax rate at 39.6% and including a “bubble rate” above that for some income of high earners.

The Senate’s bill, which is expected to receive floor consideration the week after Thanksgiving, lowers the top rate to 38.5% and doesn’t include a bubble rate.

But a senator whose vote could be important, Susan Collins, R-Maine, said she wants the top rate to stay at 39.6% so that other priorities could be funded. “There's a lot that we could do with that funding,” she recently told reporters.

So, we will see. It seems that all stops are being pulled; and all gloves are off now, in this fight with the highest of political and economic stakes. Certainly, this is a fight producers should watch closely as it emerges, Washington Insider believes.

Want to keep up with events in Washington and elsewhere throughout the day? See DTN Top Stories, our frequently updated summary of news developments of interest to producers. You can find DTN Top Stories in DTN Ag News, which is on the Main Menu on classic DTN products and on the News and Analysis Menu of DTN’s Professional and Producer products. DTN Top Stories is also on the home page and news home page of online.dtn.com. Subscribers of MyDTN.com should check out the US Ag Policy, US Farm Bill and DTN Ag News sections on their News Homepage.

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