From the WSJ Opinion Archives
THE WESTERN FRONT
Farm Favoritism
Subsidies are only the start.
President Bush will likely sign the farm bill this week--and with it the death warrant of a major section of the Gingrich revolution. Killing the Freedom to Farm Act, we've been told, means the end of weaning farmers off subsidies. It's a major reversal of farm policy and a sign the right has, on this issue, ideologically bought the farm.
The Freedom to Farm Act was revolutionary in that it sought to clean out the barn on farm subsidies. But we haven't seen one growing season since the Depression when this country's regulatory, tax and subsidy culture didn't grow farm dependency on local, state and federal officials.
Let's start with the Freedom to Farm Act itself. In 1996 many conservatives had high hopes. But even then it was clear Washington wasn't taking away the subsidy trough; that was politically unpalatable even in Newt's heyday. The act sought to reverse the Depression-era policy of paying farmers not to farm. For decades agriculture policy was premised on the idea that leaving fields fallow was good for farmers because it would drive up the price of the crops they did grow. It's hard to stay ahead of the supply curve, however, when Yankee ingenuity is ever increasing farm productivity.
In the 1990s Congress finally got around to ripping up the underlying principles of this policy (and many other policies). And although this farm bill increases subsidies by more than $80 billion over the next decade, it doesn't take us back to paying farmers not to farm. Instead, it amounts to mostly paying farmers by guaranteeing them a certain return on their products with federal money. Of course, all of this is actually going to warp the market in a different way and encourage farmers to overproduce. That'll drive down prices and drive up future subsidies.
Of course, Americans aren't stupid, so many join this protected class as "gentlemen farmers." Put up a few fences, let a couple of dozen cows roam, and presto--you can ignore that fastidious zoning official who taps his clipboard in frustration as you erect a new garage and call it a barn. You can even write some of this off your taxes as "farm expenses." It's all right there in the Agriculture Department reports, which tell us that two-thirds of all farms declare a loss--even though most commercial farms turn a profit.
Land assessment is one of many areas in which farmers get off comparatively light. Wisconsin, like most states, assesses farmland for agricultural use, not development value. Not so for nonfarm houses, whose owner's tax bills reflect the sellable value of the property. New York state has a similar system but uses special agricultural districts--343 of them. All told these districts shelter nearly 22,000 farms and 8.6 million acres from $55 million in property taxes annually. Albany has also shelled out nearly $42 million to county governments to develop farmland-protection programs and buy development rights from farmers.
In the Buckeye State, Gov. Robert Taft recently earmarked $25 million out of his state's $400 Clean Ohio Fund to buy development easements. Such programs often don't make much difference, though. Farmers are reluctant to sell their development rights to the government, since it makes more sense to pay the low taxes and wait for a high bid from a developer. But either way, these programs guarantee farmers a payout.
Another is direct taxation. Many states hand out tax exemptions and credits to farmers in keeping with a broad notion of environmental conservation. Virginia offers a 25% tax credit to offset the cost of "conservation equipment" up to $3,750. This equipment includes pesticide sprayers, manure spreaders and other items. For conservation tillage equipment the state offers a credit up to $2,500. And farmers with a conservation plan can take 25%, up to $17,500, off the top of their state tax bill for the cost of expenses for "best management practices" (equipment and methods that reduce erosion, runoff and pollution). If those expenses exceed the ceiling, farmers can carry them over and write them off over a five year period. So farmers can save on their equipment, water bills and taxes.
At the same time, many state and local governments find it difficult to make farms comply with zoning and even environmental regulations. Knox County, Ill., learned this when it landed in court after trying to stop a local hog farm from expanding. The county had revoked a building permit, claiming industrial-size farms aren't protected by agricultural zoning exemptions. In 1999 a state appellate court sided with the farm's owner, affirming that even large farms didn't need to apply for building permits or adhere to large sections of the county's zoning codes.
Even those pushing "smart growth" policies--the vanguard of local environmental movements in many counties--add farmer payouts to their proposals. Many smart-growth plans push for preserving small farms with tax credits. Sometimes they even encourage creating industrialized farm zones. Loudoun County, Va., smart-growthers justify farmer payoffs by claiming they actually save money. It's more efficient to provide government services to high-density areas surrounded by farms than paying for it in dispersed developments, they say. Too bad for anyone who wants a big lawn, but not a farm.
Sullivan County, N.Y., officials haven't been duped by "smart growth" yet. But they're pinning hopes of reviving the local economy on gifts to the agricultural industry. These gifts include a tax-abatement program (farms that improve their property can pay reduced real estate taxes on a sliding scale over 15 years). And this wooded and mountainous county has poured $13 million from a block grant into a revolving loan fund for farmers. Local officials even got the U.S. Department of Agriculture to declare the county a "Rural Economic Area Partnership" zone, one of a handful of such places in the country. What that means is the USDA provides advice to local officials and, of course, the county has a better chance at winning federal grants for more farm friendly programs.
Like the farm bill, the list of special breaks to agribusiness is numbing in length and in complexity. But it's worth noting that farm politics even made California's Gov. Gray Davis into a tax cutter. While still sweating an energy crisis last summer and talking about energy price controls, the Democrat signed a $480 million, 10-year tax cut for farmers. Farmers will get out of paying state sales tax on diesel and propane as well as new tractors and other equipment.
Say what you will about California's politics, but that state has some of the right ideas on farm subsidies. Comparatively little of the federal farm bill's largesse will make it to the Golden State, and meanwhile the state's agribusiness thrives.
The realities of life are shockingly apparent on a farm in ways they aren't always in the city. On the back of a horse, it's hard to deny that you can't muscle your way through life. It's easier to rely on a little calm forethought and work with the animal you're on. It's also hard to deny that the world has plenty of snakes that need killing and even more critters to just let alone. And come picking season, it's easy to see why people should be left to profit from the fruits of their own labor. All of this helps create that rugged individualism we hear so much about in rural America. It also reinforces the principle of do onto your neighbor as you would have him do onto you. You really need his assistance to get your crop in the barn before it spoils.
Most people intuitively know this, which is why keeping government's greedy hands off of farmers makes such good politics. But what the rest of America should be asking is simply this: If taxes, zoning laws, bizarre environmental regulations and many other government demands are so bad for farmers, aren't they just as bad for the rest of us?
Mr. Miniter is assistant editor of OpinionJournal.com. His column appears Mondays.
