U.S. farmers are being asked to give up more than $3 billion in farm program benefits over the next five years so other taxpayers can avoid paying the alternative minimum tax on some incomes above $100,000 a year.
The budget reconciliation legislation under consideration in Congress contains tax cuts of $70 billion between 2006 and 2010, but the alternative minimum tax reduction would account for more than a third of the total.
The House Agriculture Committee voted 24-20 on Oct. 28 to approve $3.7 billion in spending cuts in USDA's budget over the next five years. Committee Chairman Bob Goodlatte, R-Va., boasted that the decrease was 23 percent higher than the $3 billion required in the House-Senate Budget Resolution passed last spring.
Food stamp cuts of $844 million account for most of the difference in the House Agriculture Committee's $3.7 billion reconciliation plan and the $3.14 billion in spending reductions passed by the Senate Agriculture Committee on Oct. 19. But farmers will still feel plenty of pain from cuts in either proposal.
Chairman Goodlatte said he was pleased his committee passed a balanced and fiscally responsible package. “It is unrealistic to think we can meet the pressing challenges facing our nation without reducing federal spending and redirecting priorities,” he said.
Democrat members of the House and Senate Ag Committees complained that neither reconciliation package — $39 billion in the Senate and up to $50 billion in the House — will reduce the federal deficit because they also include the $70 billion in tax cuts.
Several blue-state senators added the phrase “for the wealthiest Americans,” which drew a strong rebuke from Iowa Sen. Charles Grassley, accusing the Democrats of engaging in “class warfare rhetoric.”
Without the $70 billion, Grassley said Congress would be adding to the tax burdens of the “little people.” Among the extensions and amounts he cited:
Increased limits on IRAs, $5.3 billion; college tuition deductions, $9.4 billion; state and local tax deductions, $2 billion; research and development tax credits, $7 billion; and deductions for classroom supplies teachers buy out of their own pockets, $200 million.
If Congress does not include his alternative minimum tax provision, Grassley said, 5 million more middle income taxpayers would have to pay $27 billion more in taxes next year.
The latter, enacted in 1969 for 155 wealthy individuals who had not paid any income tax the previous year, is hitting more Americans pushed into the AMT brackets by inflation. Grassley introduced legislation repealing the tax but has been unable to find a way to replace lost revenue. His latest proposal would prevent more Americans from having to pay the tax next year.
If you're one of those faced with higher taxes because of the alternative minimum tax or the failure to extend other tax provisions, you may support the ag spending cuts. If you're not worried about your tax bill because of drought or storm damage or higher fuel prices, you might want to contact your congressman.