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Happy Tax Day! Do You Know How You’re Subsidizing Big Ag This Year?

Tuesday, April 15, 2014


As Americans finish up their taxes, it’s worth reflecting on how those tax dollars are being spent to widen the gap between the haves and the have-nots in farming.

When members of Congress considered the $956 billion farm bill earlier this year, they had ample opportunity to reform the broken farm policies that give the lion’s share of support to the largest agribusinesses regardless of their need, while leaving smaller operations in the dust.

It was an opportunity they passed up. The bill that President Obama signed into law on February 7 was crafted to make rich farmers even richer and by and large leave small farmers to fend for themselves.

This at a time when net farm incomes are at record high levels. In fact, 10 percent of farmers (about 200,000 in all) have an average household income of at least $205,000 – more than quadruple the median annual household income across the U.S.   

Take crop insurance, for example. The new farm bill increased federal spending for the Federal Crop Insurance Program. The Congressional Budget Office estimates that the program will now cost American taxpayers $90 billion over the next 10 years.  We project that the top 10 percent of crop insurance policy holders will receive more than half of all the tax dollars the taxpayers spend to subsidize farmers’ crop insurance premiums. 

The farm bill placed no limits on how much taxpayer support a farmer can get to subsidize his crop insurance premium.  In 2011, 26 farming operations received more than $1 million apiece in taxpayer-funded crop insurance subsidies, and more than 10,000 policyholders received more than $100,000 apiece. That’s a lot of tax dollars flowing to half of one percent of American farmers.  

Unlike other businesses that cover the cost of their business insurance premiums out of pocket, taxpayers cover an average 62 percent of the premiums for crop insurance policyholders. Taxpayers are also on the hook for subsidizing the indemnity payouts when farmers lose crops as well as the administrative and operating costs of the private insurance companies that carry out the crop insurance program.

Sens. Jeanne Shaheen (D-N.H.) and Tom Coburn (R-Okla.) recently took a step in the right direction when they introduced a bill that would cap crop insurance premium subsidies at $70,000 per farm per year. This proposal gives Congress another chance to rein in the mushrooming costs of the 2014 farm bill.  Now that the supposed farm bill budget savings are a bust, Congress needs to save some money someplace.

The most recent farm bill did next to nothing to reform a crop insurance program that, according to a recent report by the Natural Resources Defense Council, encourages farmers to make riskier choices. We need more reform along the lines of what Shaheen and Coburn are proposing to keep any more of our tax dollars from flowing to the broken system that many small farmers know as a Big Ag boondoggle.


Photo: "Tax Day, New York City" by Amit Gupta licensed under CC BY 2.0


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