Iowa farmers got an unexpected bonus in the New Year’s Day legislation that averted the so-called fiscal cliff.
Iowa Farm Bureau Federation President Craig Hill said he was “shocked and surprised” that the farm bill extension included in the package reauthorized direct payments to farmers.
So were traditional farm bill critics such as the Environmental Working Group and the R Street Institute.
Hill said farmers were generally pleased with the nine-month statutory extension of most Department of Agriculture programs.
The extension of federal crop insurance subsidies and minor adjustments to the estate tax “give farmers the certainty they need going into the 2013 planting season,” Hill said.
But the reauthorization of the $5 billion per year direct payment program, which pays about $500 million a year to Iowa farmers, left him feeling “a little unsettled,” Hill said.
“The money could have been better spent,” particularly in light of the nation’s ongoing fiscal crisis, Hill said.
Created by the 1996 Freedom to Farm Act, direct payments are provided to owners of farm land that historically has been used to grow corn, cotton, rice, soybeans or wheat.
President Barack Obama has proposed abolishing the program, as has even the American Farm Bureau, and direct payments were zeroed out in the versions of the Farm Bill passed last year both by the Senate and the House Agriculture Committee.
Given the uncertainty surrounding U.S. fiscal policy, Hill said he would not count on the money until the check arrives – typically in the fall.
The average per acre direct payment is about $24 for corn and in the $10-to-$12 range for soybeans, according to David DeGennaro, a legislative analyst for the Environmental Working Group.
The average for rice and cotton, however, is about $100 and $75, respectively, which explains why Southern farmers fought to keep the payments and why Senate Minority Leader Mitch McConnell, R-Ky., wanted them as part of the farm bill extension, DeGennaro said.
Hill said farmers were relieved that the legislation will provide a permanent 40 percent tax rate on estates worth more than $5 million ($10 million per couple). Some proposals had called for a 55 percent rate with an exemption of only $1 million.
The Environmental Working Group, in a press release Wednesday, said the farm bill extension “perpetuates the widely discredited direct payment farm subsidies that will send $5 billion this year alone to large farming operations that already reap record profits.”
The R Street Institute said the extension marks a missed opportunity to kill a program “that lawmakers from both sides of the aisle recognize is horribly wasteful.”