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Means Testing Rich Farmers
Dozens of federal programs deny or reduce benefits to people with significant income or assets. Even some of the poorest Americans must prove that their income doesn’t exceed a certain amount to qualify for welfare or nutrition assistance. It’s called a means test.
So doesn’t it make sense to subject some of the richest farmers to a means test when they seek federal subsidies to pay for their crop insurance?
Congress seems to think so. The Senate twice passed an amendment reducing crop insurance subsidies for the largest 1 percent of farm businesses, and the House went along last week.
Means testing is nothing new for most agencies – including USDA.
For example, applicants for the Special Supplemental Nutrition Program for Women, Infants, and Children – better known as WIC – must have an “adjusted gross income” that’s no more than 185 percent of the poverty line. That currently works out to $43,567.50 a year for a family of four.
Some farm subsidies are also subject to means tests. Under current law, farmers with an adjusted gross income of more than $750,000 a year are not eligible for direct and counter-cyclical subsidy payments.
So why shouldn’t crop insurance subsidies be subject to a means test, too?
The proposal championed by Sens. Tom Coburn (R-Okla.) and Dick Durbin (D-Ill.) and Reps. Richard Hanna (R-N.Y.), Paul Ryan (R-Wis.), and Chellie Pingree (D-Maine) would do just that, reduce crop insurance premium support by 15 percentage points for farmers with an adjusted gross income of more than $750,000.
That doesn’t mean that farm businesses that clear more than $750,000 in profit from farming would be ineligible for all crop insurance subsidies. What it means is that the largest 1 percent of farm businesses would simply get less.
Certainly, a farm business clearing $750,000 a year can afford to pay more of its risk management costs. Right?
Because there are currently no income limits on crop insurance, more than 10,000 policyholders currently receive more than $100,000 a year in premium support and a few dozen receive more than $1 million a year – in subsidies.
Reducing their premium support by 15 percentage points – or cutting crop insurance premiums more broadly – would have little or no impact on farmers. And, reducing premium support for the largest 1 percent of farm businesses would have little impact on participation in the program, as contrary to what Agriculture Committee Chairman Frank Lucas (R-Okla.) recently argued on the floor of the House.
You don’t have to be an Oklahoma wheat farmer to know that farmers will still purchase crop insurance regardless of whether the government pays 50 percent or 65 percent of their premiums.