Taxpayers for Common Sense: Waste Through the Grapevine

Waste Through the Grapevine

Volume XX No.26: June 26, 2015

In its last week before summer recess, the Supreme Court released an opinion that will impact every taxpayer. No, we’re not referring to cases involving tax credits for health care or the legality of same-sex marriage. We’re talking raisins. In Horne v USDA the Court pruned one branch of the tangled web of taxpayer supports that have grown up for agriculture. Lawmakers should follow the Court’s lead and sap the juice out of many other outdated and costly agricultural giveaways.

If you’re in California and grow grapes you plan to turn into raisins, you have to contend with the Raisin Administrative Committee (RAC), or as we like to say RAC-ket. Every year this government-backed cartel, err industry committee, will tell you what percentage of your crop you must hand over to them in order to keep the price of raisins artificially high. After taking your, now their, raisins, the RACket usually dumps them on school lunch programs or sells them in foreign countries. Your compensation? The “benefit” of selling your non-confiscated raisins, which in the Orwellian language of the USDA are “free raisins,” in the market. The Supreme Court ruled this literal taking of raisins, which in the 2002-2003 growing year was 47% of the crop, was a “takings” of private property and thus the Hornes would be owed “just compensation” according to the 5thAmendment.  

The ruling in Horne is important for the Horne family, which avoids $700,000 in fines, but also because it brings back into the limelight the many machinations lawmakers undertake to manipulate prices in agriculture. There are nearly 30 separate marketing orders backed by USDA. While “volume control” is allowed for some orders like raisins, almonds, and cherries (tart ones, but not sweet), other orders set minimum grade, size, maturity, or packaging requirements. All are designed to use governmental power to erect barriers that restrict supply, leading to increased prices. While that may be good for the bottom line of a handful of producers already growing that crop, it’s done at the expense of consumers, taxpayers, and other farmers who want to compete in the market.

Attempts to jack-up farm incomes by replacing the independent judgment of American farmers with the wisdom of planners in USDA’s office on Independence Avenue aren’t restricted to marketing orders. Another issue heard through the grapevine (i.e. Washington Post) this week is that the Corn Refiners Association is taking aim at the sugar industry. With price supports, country-specific import quotas, limits on the amount of sugar U.S. refineries can manufacture, and even a program to buy sugar and sell it at a loss to ethanol plants, sugar has a sweet suite of taxpayer-paid market-distorting policies that should be reformed.

The notion of corn refiners leading the charge on taxpayer giveaways is a bit rich as corn farmers are busy enrolling in new budget busting income guarantee programs created by last year’s farm bill. USDA recently announced that 91 percent of corn farmers and 96 percent of soybean farmers have enrolled in the Agriculture Risk Coverage (ARC) program. Coupled with the Price Loss Coverage (PLC) that guarantees minimum prices for rice and peanut producers, taxpayers can expect to spend at least $35 billion propping up the income of farmers through these programs. And that’s not even accounting for the $9 billion-a-year federally subsidized crop insurance program and disaster aid that will surely follow the drought out west.

When it comes to using federal policy to shovel tax dollars to agriculture, Washington just can’t help itself. There are supports for corn through the ethanol mandate, as well as subsidies to push more ethanol into the market.  Southern legislators increased barriers to foreign-raised fish by moving inspection of catfish to the USDA, even though the Food and Drug Administration polices every other seafood.  Uncle Sam has paid for a Brazil Cotton Institute as a bribe to stop them from slapping retaliatory tariffs on our goods because our cotton subsidies are trade distorting. And the House Appropriations Agriculture Subcommittee is trying to give cotton farmers more than the $125,000 limit on subsidy payments ($250,000 for a married couple) by reviving a program, but just for cotton, that was eliminated in 2008.

Too often the goal of lawmakers is to use the power of the federal government to pick winners and losers while artificially propping up incomes for favored farming constituencies. Lawmakers should come back from their 4th of July recess ready to cut the Gordian knot of agriculture supports, restrictions, and subsidies. 

Quote of the Week:

“You can't spend those dollars twice."

- Rep. Kevin Brady (R-TX)referring to plans to use revenue generated by taxing corporate earnings overseas to fund infrastructure bills instead of in a future tax reform package to lower rates.

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