Winners and Loser : Farm Bill, Death Tax, Politicians versus Me, the taxpayer

Gil Gutknecht aptly called the US Senate “the graveyard of all good ideas” and this week the Senate applied a lethal Double Dose to two good pieces of legislation. Gutknecht was part of the 109th Do-Nothing Congress and the Senate seems to be acting to ensure that the 110th does no better.

Senate Agriculture Committee Chairman Tom Harkin said Thursday that "If we can't get a farm bill through the Senate that came out of the committee without one dissenting vote ... If we can't do that then what's the use trying to do it next year with the same Senate?" and effectively postponing the legislation until after the 2008 election And Republican House members seem to be in agreement. So lobbyists will continue to make contributions until the legislation is resolved. And that’s why there will not be any legislation this term … the politicians win.

We may – or may not – like the Farm Bill, but to pass it along to the next Congress and President is not only shameful but woefully irresponsible.

On Wednesday, the Senate held hearings entitled “The Federal Estate Tax: Uncertainty in Planning Under the Current Law.” What is at stake is potentially $24 Billion in revenues, but the statements by Senators Max Baucus and Chuck Grassley indicate a strong opinion that this tax loophole be continued. Ironically, Warren Buffet appeared at the hearing and spoke of continuing the tax. The argument is full of dramatic misinformation that these taxes are largely unfair inheritance taxes paid by hard-working owners of small and medium companies. In reality most estates don't owe any estate tax at all. Gutknecht like to talk how people like Buffett would create trusts and nonprofit groups to avoid paying inheritance taxes. That’s true and a separate argument … (why isn’t the same argument made when nonprofit groups are created to avoid paying ordinary income which is commonplace with sports stars? Yes, those monies can support a number of great charities (for example, the Pohlad Family Foundation)
and we thank them … but we helped created their wealth by our support) There are a number of tax planning strategies (generation skipping trusts, etc.) and a number of significant exemptions that apply such that the number of estates that actually are taxed are relatively small in number. The tax only applies to the amount over the exemption (for example in 2009, the provision is for a $3.5 million exemption).
The people who potentially may pay it are the super-rich. For example, here is a list of 24 individuals from anti-estate-tax families on the Forbes 400 list, 20 owe their good fortune to their forbearers, since only four represent the first generation of family wealth. In fact, since they inherited their wealth, they received step-up tax cost basis thereby reducing the capital gains tax (talk about double-dipping on the taxpayers !) These people are lobbying Congress hard (i.e. making contributions to their "favorite" candidates ... fyi - Mitt Romney's first TV commercial was about the unfair death tax.) And that’s why there will not be any legislation this term … the politicians win.

So this week, the politicians have won twice … by doing nothing … delaying and denying good legislation. So who lost … that would be the taxpayers. As long as the politicians don’t act, the unfair tax system remains in effect and working Americans pay while good programs are not enacted. The national debt rises and the US dollars loses value.

The House has done a good job getting a Farm Bill passed as well as the Temporary Tax Relief Act of 2007 (H R 3996) that would do a number of things including revising the Alternative Minimum Tax (AMT) that impacts working middle class families. But that Senate's inaction proves the axiom is correct : “the graveyard of all good ideas”.
How will Norm Coleman explain how he sat on the Agriculture Committee that passed the Farm Bill, yet he could not get it passed by the entire Senate ?

Why is John Kline pushing Gutknecht’s agenda ?

The November elections should have sent a message to John Kline, but apparently he does not realize why so many voters turned away from his party’s message. No, I am not talking about Iraq, but instead fiscal discipline.

The Republican Study Group, whose members advocated a fiscal and social conservative agenda and included John Kline as a member, has seen their membership dwindle. What do Chocola (IN), Beuprez(CO), Northrup(KY), Pombo(CA), Hayworth(AZ), Hostettler(IN), Sodrel(IN), Ryan(KS), Taylor(NC) and of course, our own Gil Gutknecht have in common … all defeated Congressmen who were members of the RSG. And on the Senate side, when Mark Kennedy, Rick Santorum(PA), Mike DeWine(OH) and Conrad Burns(WY) were in the House, they also were members of the RSG. These people were not rookies, but candidates that had principally ran campaigns that promised fiscal discipline.

The Republican Party advertised itself as advocating smaller government and market-based responses -- not mandates. The voters see the rising deficit, earmark spending and corruption and realized that accountability belonged to those that promised to address our fiscal future.

Now, Kline has introduced HR 349 [Title: To amend the Clean Air Act to require all gasoline sold for use in motor vehicles to contain 10 percent renewable fuel in the year 2010 and thereafter, and for other purposes.]
To those of us in the First District, we’ve heard of this legislation before … essentially it is the same as H.R.4357 which Gil Gutknecht talked about ad nausea over the past two years. Gutknecht’s bill had 44 co-sponsors (plenty of those Representatives are now longer in Congress) and was issued during a Republican controlled Congress. Kline’s bill has seven cosponsors and will need plenty of support from the Democrats if it has any chance of being turned into law.

So the first question is, is this legislation necessary ? Or, are market-based actions not working such that mandates are required ?

US News and World Reports did a Special Report “Overselling Ethanol” in their February 12 edition.
Consider the following statements from that report.

“Even though the ethanol industry profited handsomely last year, it continued to benefit from billions of dollars in taxpayer subsidies.
… in 2005, when, with gasoline prices ratcheting higher, Congress wrote into its big energy bill a renewable fuel standard, an unprecedented mandate requiring refiners to double the amount of ethanol they blend into the nation's gasoline by 2012.
… ethanol tax breaks—now at 51 cents per gallon—the government sent $2.5 billion last year to the flush oil industry to blend ethanol it would have needed anyway.
Nearly half of the gasoline being sold in the United States now contains 10 percent ethanol. But that leaves half the market open to conquest. Some 76 ethanol refineries are now under construction, including in such unlikely states as New York and Oregon, adding to the 112 already squeezing fuel from corn. By some counts, 200 more have been proposed.
… growth in ethanol gobbled up 20 percent of the U.S. corn crop. That surpasses all the corn Americans consumed last year—whether in cereal, corn-syrup-sweetened soda, or on the cob. And the strain has become severe on the nation's primary use of corn—as feed for dairy and beef cattle, pigs, and chickens. Meat, dairy, and egg producers are reeling from corn prices that have doubled in one year—now trading above $4 a bushel for the first time in more than a decade.
Because of its lower energy content, it takes 1.5 gallons of ethanol to drive as far as 1 gallon of gasoline. Consumer Reports calculates E-85 ended up costing motorists about a dollar extra per gallon last year because of the need to buy more fuel.”


So, in summary, Congress has already mandated a 2012 date, half the goal has already been met, and the industry is building refineries in response to market needs. In the end, consumers may pay more for other corn-based products and yet not realize a reduction in fuel consumed.
For the fiscal conservatives, this appears to be another tax break -- that at one time was a necessary inducement to start the industry -- but now is costing the taxpayers.

So now to the second question, why would Kline offer this legislation? If you read his press release that announced the legislation, there is a picture of Kline with representatives of the Minnesota Corn Growers Association.
Ah, huh … so is it all about campaign donations?
The US News and World Reports also states : “The Renewable Fuels Association have increased its lobbying spending 60 percent in the past seven years. The 10 largest ethanol producers and their trade groups have handed out $4.7 million in federal campaign contributions since 2000, says the Center for Responsive Politics.

Com’n Kline … stand up for responsible government spending that does not require mandates to reward your political cronies with tax breaks.


The US News and World Reports concludes with an assessment from Lee Lynd, Dartmouth College engineering professor and cellulosic pioneer. “Ethanol would make its greatest dent if Americans drove less and highly efficient cars were deployed widely.”

Improving CAFÉ standards and advancing fuel cell technology would do more to address our energy needs than hyping ethanol production.