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House and Senate farm bill differences narrow

Agriculture.com Staff 04/18/2008 @ 8:30pm

Yesterday negotiators from the House and Senate shaved billions of dollars in difference over how increased spending for a new farm bill will be paid for, but remaining obstacles over ag-related tax cuts will still need to be worked out over the weekend if a new farm bill has a chance of succeeding.

At a farm bill conference committee meeting Friday, Senate Agriculture Committee Chairman Tom Harkin said the tax cuts, which now stand at an estimated $2.4 billion over 10 years, would be "fully paid for" with ag-related reforms in the tax code and a reduction in the ethanol tax credit.

Agriculture Committees from both the Senate and House have already agreed to a rough outline, or framework, of how they plan to spend an additional $10 billion for the new farm bill over the next decade (with the five-year bill costing about $300 billion). But until yesterday, the House and Senate were far apart on how to come up with the extra $10 billion. The House had proposed increasing spending by about $6 billion and had not identified how another $4 billion would be found for a new permanent disaster program favored by the Senate.

But by Friday morning, the two sides were closer. The House had come up with sources of money for $9.5 billion.

But there will still misunderstanding over how that would be done.

Harkin said that part of the extra $3.5 billion proposed by the House was from a $1 billion cut in direct payments. But House Agriculture Committee Chairman Collin Peterson said that the $1 billion might include other things, including some savings from farm program payment reform.

Representative Bob Goodlatte, the ranking Republican on the House ag panel, agreed.

If Harkin understood all of that $1 billion came from direct payments, Goodlatte said, "I misspoke. It is to come from the ag portion of the bill."

Peterson said that getting $9.5 billion from the House for new spending should be viewed as "significant progress."

"We believe we will be able to get to $10 billion on the House side, but we're not there yet," he said.

The bigger obstacle remains the $2.4 billion in tax cuts, Peterson said.

The Senate's ways of paying for those tax cuts include cutting the ethanol tax credit enough to bring in $1.226 billion over 10 years and capping losses claimed by wealthy individuals on their income tax Schedule F to bring in another 456 million. An optional self employment tax and other unidentified reforms would make up the rest of the $2.4 billion in offsets.

But Peterson said members of the House have misgivings about some of the tax cuts, which to save money, are written to expire soon. A $453 million tax credit for timber lasts one year, but if it's renewed over the next 10 years, that's $4.5 billion, Peterson said. "The feeling is that this is not a $2.4 billion tax package, it's a $10 billion tax package."

Senator Kent Conrad, a member of the Senate Finance Committee and Chairman of the Budget Committee, told the conference committee that tax cuts aren't always written to be permanent, including the 2001 tax cut package passed by Congress. And, in the case of tax credits for cellulosic ethanol, "there is no intention that be an ongoing program," he said.

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