Republicans Blast Democrats' 'Surprise Tax Hike'

By Susan Jones | July 7, 2008 | 8:32 PM EDT

( - Republicans complain that House Democrats have proposed a "surprise tax hike" to help pay for the 2007 farm bill, something that could prevent the bill from passing this week, House Republican Leader John Boehner said.

The "bombshell" came Wednesday afternoon, when Democrats revealed that they plan to pay for spending increases in the huge farm bill with higher taxes on foreign-owned companies that have U.S. subsidiaries.

The proposed tax hike on "insourcing" companies threatens to destroy more than 5 million American jobs, Republicans complained.

Rep. Bob Goodlatte (R-Va.), the senior Republican Member of the House Agriculture Committee, said Wednesday that he and all GOP members of the Agriculture Committee will oppose the tax hike and are prepared to vote against the farm bill because of it.

U.S. Agriculture Secretary Mike Johanns on Wednesday called it "unacceptable to raise taxes to pay for a farm bill that contains virtually no reform."

The Organization for International Investment calls the proposed tax hike on "insourcing" companies discriminatory.

"This protectionist tax hike on companies bringing jobs into the United States comes completely out of left field," said Todd M. Malan, President and CEO of the Organization for International Investment (OFII), a business group representing 160 of the largest U.S. subsidiaries of companies based abroad.

"Global capital markets are worried enough about trade protectionism in Congress," Malan said, adding that "a discriminatory tax aimed at 'foreign companies' could spook an already jittery stock market."

The tax-hike measure, introduced by Rep. Lloyd Doggett (D-Tex.), would only apply to U.S. subsidiaries of companies based abroad, including the Samsung semiconductor plant in Austin, Tex., where thousands of Doggett's own constituents work, OFII noted.

"Members of Congress need to understand before they vote on this measure that this is not a tax hike on 'foreigners,' it's a tax increase on companies in their district," Malan said.

The House is expected to begin debating the farm bill on Thursday.

H.R. 2419 would fund the continuation of agricultural and nutrition programs through fiscal year 2012. The most controversial provisions include farm subsidies -- too high, the Bush administration and other fiscal conservatives say.

Agriculture Secretary Mike Johann said that he and President Bush's other senior advisors will recommend that he veto the farm bill if Congress passes it in its current form. "We are unanimous on this point," he said on Wednesday.

The farm bill would ban subsidies to farmers with incomes averaging more than $1 million a year, but that would apply to only about 7,000 farmers, Johann said.

The administration wants to lower the income limit to $200,000, something that would dry up subsidies to about 38,000 farmers.

On Thursday, the House will consider a "fairness" amendment to the farm bill, introduced by Reps. Ron Kind (D-Wis.) and Rep. Jeff Flake (R-Ariz.), that would deny subsidies to farmers with an annual adjusted gross income of $500,000 or more. The amendment also would set an annual subsidy limit of $250,000 per person.

The Council for Citizens Against Government Waste (CCAGW) is among the diverse groups applauding the "Fairness in Farm and Food Policy Amendment," calling it the only opportunity to reform the "unfair and counterproductive" crop subsidy system.

"The fairness amendment would gradually reduce the direct payments that were created in the 1996 farm bill. These payments were intended to be phased out, not turned into an entitlement program for wealthy farmers, which was done in the 2002 Farm Bill," said CCAGW President Thomas A. Schatz.

"Make no mistake about it: the 2007 Farm Bill as reported by the Agriculture Committee provides absolutely no reform of archaic farm subsidies. It continues the same old policies that help the richest farmers get richer and doesn't help small farmers stay on their land," Schatz added.

Groups across the political spectrum support the fairness amendment as well.

"The Farm Bill isn't just for farmers," said Jim Lyons, vice president of Oxfam America. "This farm bill is the most important poverty vote and the most important environmental vote that the Congress will make this year. It is essential for Democratic leaders to demonstrate that, contrary to popular myth, they don't need to tax and spend to serve the broader interests of all Americans, just the courage to enact real reform."

Steve Ellis, vice president of Taxpayers for Common Sense, said the farm bill, as it currently stands, "stinks of rotten programs and taxpayer waste. Lawmakers need to do more than just hold their noses and vote for another pile of farm bill slop this year. The Fairness amendment gives them the opportunity to start cleaning up farm programs, making them market oriented, less costly and trade compliant," Ellis said.

The Fairness amendment "provides desperately needed reform to improve conservation, nutrition, rural development," said the Rev. Jim Wallis, editor and executive director of Sojourners/Call to Renewal. "Congress is faced with a real test of moral leadership in changing currently unjust policy that props up the wealthiest farmers and landowners
at the expense of struggling family farms and people living in poverty at home and abroad."

"The Fairness in Farm and Food Policy Amendment would reduce and restructure subsidies to help reward -- not reject -- farmers when they take steps to help the environment," said Scott Faber, farm policy campaign director with Environmental Defense.

"This is the strongest left-right coalition ever assembled to reform the nation's outdated and misguided farm policies," said David Keating, executive director of the Club for Growth. "Hitting lawmakers from the left and the right, we plan to score a knockout punch over the special interests who want to continue the status quo," Keating added.

The U.S. Chamber of Commerce said it opposes numerous provisions in the bill.

"In its current form, this farm bill fails to achieve meaningful reform of our nations' outdated agricultural policy, distorts international trade, and raises taxes in order to pay for the programs it authorizes," the Chamber said in a news release. "This year's farm bill was an opportunity to modernize our farm policies, wean farmers from market-distorting subsidies, and immunize the U.S. from potential World Trade Organizations challenges."

The Congressional Budget Office estimates that the farm bill would bring total spending for USDA programs to $286 billion over the 2008-2012 period and to $614 billion over the 2008-2017 period.

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