Farm bill: tax increase or closing a loophole?

Was it a tax increase or closing a “loophole” that allows foreign companies to shift U.S. earnings to countries with lower tax rates? Whatever it was, it came perilously close to derailing the “carefully crafted” farm bill the House passed July 27.

The bill was reported out of the House Agriculture Committee by a unanimous vote of its 25 Democrats and 21 Republicans on July 19. In the end, only 19 Republicans voted for the bill, H.R. 2419, which passed the House 231 to 191.

Most Republican committee members went over to the other side after Rep. Lloyd Doggett, D-Texas, proposed raising $7.8 billion to pay for increases in nutrition and renewable energy spending by changing the tax rules for foreign companies with U.S. subsidiaries.

Rep. Bob Goodlatte, the committee’s ranking Republican, called the proposal a tax increase. Others fumed the House leadership added the offset provision without a committee hearing or input from Republican committee members.

Agriculture Secretary Mike Johanns, already miffed that the ag committee rejected most of the proposals USDA put forth from its farm bill forums, said the addition of a tax increase could lead to a veto. Johanns also complained the bill did not do enough to reduce farm subsidies or limit payments to larger farmers.

Others fretted farmers may have picked up some powerful enemies in a U.S. business community already upset over the lack of progress in the agricultural negotiations in the Doha Round.

Later, Agriculture Committee Chairman Collin Peterson chided Republicans for putting political ideology — rejection of a tax increase — over the needs of farmers. “Apparently, the administration and some in the Republican leadership care more about allowing foreign companies to exploit the U.S. tax system than supporting farmers.”

Peterson questioned Republican motives for defecting from the farm bill, suggesting the tax issue was an excuse to deny Democrats a victory. And he rejected U.S. Trade Representative Susan Schwab’s comments that the lack of commodity program changes would not help the U.S. cause in the WTO trade negotiations.

“The USTR has not done what they should have on the Doha negotiations,” he said, adding the trade representative and USDA “seem to be more willing to roll over and give up more than we have to for a trade agreement. The committee is doing what they think is right for farmers, and that’s not always in synch with what USTR is trying to do.”

The chairman said he wasn’t concerned about the closeness of the vote or the veto threat. “There’s never been a veto of a farm bill,” he told reporters following the House vote.

But he also appeared to be trying to reconcile with Goodlatte and other Republican committee members. Those who remember the 2002 farm bill debate saw how important it can be for House conferees to present a united front when they sit down with their Senate counterparts to write the final act of this drama.

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