The Senate Farm Bill is purely a proposal by the democrats on the Senate Ag Committee with no input from the Republican side and it shows in the summary released by chairwomen Stabenow (D-MI) about a week ago. We have previously posted on this summary, but in today’s post we will specifically review one proposal that we don’t believe will achieve their objective and even penalize the farmers they are trying to help.
In Sec. 1104 dealing with payment acres, the following wording is used:
“Restricts commodity program payments from being made on land owned by an individual or legal entity for which the average Adjusted Gross Income (AGI) exceeds $700,000 to discourage further investor purchases, which would restrict, for the first time, wealthy investors and absentee landlords from benefitting from farm safety net programs intended to support the active farmers that are taking the risk and producing the crops.”
This appears to indicate that if any person owns farmland and their AGI is over $700,000, then no payments are allowed. A farmer who is cash renting the ground and their AGI is under $700,000 would be prevented from receiving any payment solely due to the landowner’s AGI being over $700,000.
It seems that the democrats want to punish the landowner for have high AGI, but the reality is that the farmer is being punished. The farmer whose AGI is under $700,000 and would normally know that they will receive a payment from FSA for farming this ground and is willing to pay a little extra currently has a little bit of an advantage over a farmer who is over the AGI or payment limit.
Wealthy investors and absentee landlords already get no direct benefit from farm program payments if their AGI is over $900,000. This would reduce that limit from $900,000 to $700,000. Also, technically the limit would be $1.4 million in community property states and in separate property states, the higher income spouse would simply gift the land to the lower income spouse to get under the limit.
If this rule is passed and works the way we think it will work, the farmer with low AGI will now be at a disadvantage in trying to cash rent this ground. The farmer with higher AGI or over the payment limit will now be in better position to cash rent the ground.
The Democrat Senate proposal appears to want to help the “farmer with dirt under their fingernails” (farmer with lower AGI), when in fact, they will penalize that farmer. This is the law of unintended consequences, and it will not work the way they desire.
Now we may be wrong about the meaning of this proposal but based on a literal reading of the summary and conversations we had; we think this is what they want. If this were to pass it would only penalize “active farmers that are taking the risk and producing the crops.”
We hope they reconsider before they penalize the farmers they are trying to help.
