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AgMag BLOG

Feeding your mind, saving the planet >>

Assessing the Effect of Taxes on the Economy

Monday, September 21, 2009

San Francisco Chronicle, Bill Walker

Published August 18, 2005

Let's say you own a factory that makes titanium widgets. You make more widgets than people need, so the government buys your surplus at a guaranteed profit. That's generous.

But titanium is scarce and expensive. So the government sells you all you need at a deep discount -- so you can continue to make surplus widgets the government buys at a guaranteed profit. That's crazy.

But that's the twisted logic behind federal farm subsidies in California, where some of America's richest agribusinesses are double-dipping into taxpayers' pockets at a rate of hundreds of millions of dollars a year. An analysis of data from the Bureau of Reclamation and the Department of Agriculture shows that more than 1,000 farms in the Central Valley Project irrigation system get cheap, taxpayer-subsidized water to grow surplus crops the government subsidizes a second time with price supports.

Most double-dippers grow cotton or rice, but some dairy farms take it another step. These triple-dippers use subsidized water to grow subsidized corn they feed to cattle that produce subsidized milk and cheese.

More than one-fourth of the 6,800 farms in the Central Valley Project got double subsidies between 1995 and 2004, according to an analysis from the U.S. Bureau of Reclamation and the Department of Agriculture. Crop-subsidy checks to these farms in that period were more than $891 million, and with their water subsidies worth about $150 million a year, these subsidy recipients' combined take from the taxpayers over 10 years is more than $2 billion.

That's just in California. There are about 180 federal water projects in the West, and the Bureau of Reclamation, the Department of Agriculture and other agencies agree that one-third or more of all subsidized irrigation water is used to grow subsidized surplus crops.

Both water subsidies and crop subsidies were intended to support smaller family farms. But nationwide, 10 percent of crop subsidy recipients get 72 percent of the money, and 10 percent of farms in the Central Valley Project get two-thirds of the water. The conservative Heritage Foundation says farm subsidies have become America's biggest corporate-welfare program, and double-dipping is how some rich farmers game the system so that taxpayers pay not only for their finished product but their raw materials.

Eleven times since 1982, Congress has considered legislation to prohibit double-dipping. Nothing happened. In 1990, the Interior Department's inspector general told the Bureau of Reclamation the practice should be "discontinue[d] expeditiously." Nothing happened.

But the time is ripe for change. The Bureau of Reclamation is renewing long-term subsidy contracts for Central Valley water-users. Crop subsidies grow ever more bloated, with $12.5 billion paid out in 2004. The World Trade Organization has ruled in favor of Brazil's complaint that U.S. cotton subsidies are illegal, and Uruguay plans a similar challenge to rice subsidies. At the G8 summit July 7, President Bush said the United States and Europe should "rid our respective countries of agricultural subsidies" by 2010.

Eliminating double-dipping is a commonsense idea the White House could accomplish with the stroke of a pen. It would make federal farm policy fairer to the majority of farmers in California and other states, who receive neither crop nor water subsidies. It would save taxpayers hundreds of millions of dollars a year. If the president is serious about ending wasteful and inequitable farm subsidies, ending double-dipping is an obvious place to start.

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