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Tobacco Subsidies are Smoking Gun

Tuesday, May 21, 2013


Arizona Sen. John McCain ignited an historic debate over crop insurance yesterday when he offered an amendment to the farm bill that would end insurance subsidies to tobacco farmers.

The amendment offered by McCain and Sen. Dianne Feinstein (D-Calif.) would actually end tobacco subsidies. 

Like most of us, McCain thought the U.S. stopped subsidizing tobacco after the famed “tobacco” buy-out in 2004. Fact is, between 1995 and 2011, taxpayers gave tobacco farmers another $276 million in crop insurance subsidies – on top of $1.3 billion in other farm subsidies.

As McCain said, “it turns out Joe Camel’s nose has been under the tent all this time in the form of hidden crop insurance subsidies.”

It also turns outs that tobacco subsidies are a smoking gun. Where there’s smoke, there’s fire.

Until now, crop insurance subsidies have largely remained hidden from public view – even though taxpayers pay two-thirds of the cost of premium subsidies and most of the claims when disaster strikes.  

But, as the cost of the program has exploded – from $2 billion in 2001 to $9 billion in 2011 – more legislators have begun to wonder why farmer businesses and crop insurance companies enjoying record profits can’t share more of the cost of their risk management.

For example, Sens. Jeanne Shaheen (D-N.H.) and Pat Toomey (R-Penn.) wonder why the $50,000 payment limit that applies to other farm subsidies doesn’t apply to crop insurance premiums. Under current law, some farm businesses should annually receive more than $1 million in premium support, and more than 10,000 policyholders should receive more than $100,000 in insurance subsidies.

Senators Richard Durbin (D-Ill.) and Tom Coburn (R-Okla.) wonder why farmers with an Adjusted Gross Income more than $750,000 should receive the same amount of premium support as their less profitable neighbors. While the largest 1 percent of policyholders receive about $220,000 in subsidies, the bottom 80 percent get about $5,000. Usually, farmers with an AGI of more than $750,000 aren’t even eligible for subsidies.

Sens. Mark Begich (D-Ark.) and Jeff Flake (R-Ariz.) wonder why we know which farm businesses receive other farm payments but are prohibited from knowing who receives premium support. Flake also wonders why we pay some farmers indemnities based on the price of the crop at the time of harvest – and not based on the price they expected to earn in the spring. 

McCain and Feinstein have simply lit the spark.  Other senators will help illuminate a program that been in the dark far too long. 

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