The Christmas Tree Tax Is a Microcosm of What’s Wrong with Constitutional Law
Jim Harper beat me to the punch on the new Christmas tree tax — probably because I initially thought it was a joke — but there’s actually much more to say here beyond the USDA’s claim that it’s not a tax and the general absurdity of the situation. Three quick things:
First, there are obvious Free Exercise and Equal Protection issues here. That is, unless we consider Christmas trees to be wholly secular, this is an obvious burden on the free exercise of Christianity, and one that no other religion faces. Even if it might be reasonable to see Christmas trees as not particularly religious – pine trees played no role in The Greatest Story Ever Told and, e.g., my secular Jewish family always had a traditional Russian New Year’s Tree (which has no ties to Russian Orthodox Christianity) – but do we want courts drawing lines between, say, creches/crucifixes and trees/Santa?
Second, and probably even more important given the times in which we live, where in the Constitution does the federal government get the power to tax the sale of a local agricultural product? Setting aside trees trucked in from out-of-state, there’s no interstate commerce here to regulate. And if it’s a tax (which, again, Ag officials deny) — presumably an excise, which is specified in the Constitution and which courts have construed to be a tax on transactions or privileges – how does assessing it to promote the general welfare or common defense? The administration cites the Commodity Promotion, Research and Information Act of 1996, under which the tax mandatory fee funds a new program to ”enhance the image of Christmas trees and the Christmas tree industry in the United States.” That’s what passes for the general welfare?
Third, even if the tax is a lawful use of federal power, shouldn’t Congress be the body levying it, rather than an agency of the USDA?
I could go on, but this little 15-cent tree tax is a microcosm of what’s wrong with constitutional law, evermore divorced from the Constitution as it is. Yes, under modern doctrine, the Christmas tree tax can be probably justified under either the Commerce Clause or the General Welfare Clause — and Congress can delegate to bureaucrats the power to levy certain “assessments” – but is that the kind of government we signed up for?
h/t Cato legal associate Chaim Gordon
The Ratchet Effect, Agriculture Edition
Between the lines of a front-page Wall Street Journal article about farm subsidies [$] is an instructive example of the ratchet effect:
Land prices are way up and so are bank deposits, as high corn and soybean prices mean local farmers are making the most money in their lives…An exception to the boom is the local office of the U.S. Agriculture Department, the dispensary of federal payments to farmers from an array of arcane programs with names like ‘loan deficiency’ and ‘milk income loss.’ On a recent afternoon, the parking lot in front of the squat brick building behind a Chinese restaurant was nearly empty.
The reason: Payments from America’s primary farm-subsidy program, dating from the 1930s, have stopped here. Grain prices are far too high to trigger payouts under the program’s ‘price support’ formula. The market, in other words, has done what decades of political wrangling couldn’t: slash farm subsidies.
Though the subsidy payments always ebbed and flowed with crop prices, many economists are convinced that what is happening now is different. A fundamental upward shift in crop prices is creating the real possibility that Midwestern farmers won’t ever again qualify for the primary form of farm subsidy.
There remain other types of subsidies, which continue to pay out because they aren’t linked to market prices. But high prices are undermining political support for those programs…
Well, there’s some good news. Maybe we can start downsizing the USDA, including by closing some of those local offices? Not so fast. The last two paragraphs of the article (on page A10) leave us with this cheery thought [emphasis added]:
Meanwhile, workers in the USDA’s county offices, seeing the handwriting on the wall, are campaigning for new things to do, now that there aren’t any price-support payments to dispense. One idea is to give them responsibility for federally subsidized crop insurance, currently handled by private companies.
Heck, why not? Heaven knows the federal government is flush with cash.
The (Beginning of the) End of the Shameful U.S. Cotton Deal?
Heartening news from the Appropriations Committee yesterday: they voted to cut aid to farmers generally, and to make significant changes to an egregious cotton program. But first, some background. You’ll recall the embarrassing deal made by the Obama administration last year to head off Brazil’s right to impede American exports in retaliation for WTO-illegal cotton support. The United States is, in other words, now sending almost $150m worth of “technical assistance” and “capacity building” funds to Brazil, just so we can continue to subsidize American cotton growers without penalty (so much for U.S. promotion of the rule of law in international commercial relations). Rep. Ron Kind (D-WI) tried to end that deal earlier this year, but to no avail. Big Ag’s friends in Congress argued, unfortunately successfully, that any changes to the cotton bribes should be dealt with in the context of the 2012 Farm Bill, and by the agriculture committees (good luck with that).
But yesterday, the Appropriations Committee approved by voice vote an amendment from Rep. Jeff Flake (R-AZ) to take the fiscal 2013 payment to Brazil from funds that would normally go to supporting U.S. cotton growers. According to an article [$] in the Congressional Quarterly, Rep. Flake argued that “American cotton growers should pay the bill since the United States was making the payment on their behalf.” Well played, sir. Rep. Rosa DeLauro (D-CT) filed an amendment that would send the FY2012 cotton payment to the Women’s, Infants and Children nutrition program instead.
The Committee also voted to lower the income eligibility cap to $250,000 AGI.
The CQ article did contain this worrying footnote, however:
Support for the amendments may be tenuous — especially if lawmakers cannot hide behind the anonymity of a voice vote. After winning the voice vote in committee, Flake sought a roll call, prompting appropriators of both parties to suggest that he did not need the recorded vote. Flake took their advice and demurred.
Leglislators are usually shy about publicizing their positions only when they think it could get them in political hot water, so let’s not uncork the champagne yet.
Agriculture Cuts to Usher in the Apocalypse
Harold Camping is “flabbergasted” that the world did not end on May 21st as he had predicted. I think it’s because he didn’t account for the devastation that will be wrought by Republican budget cuts for fiscal 2012, which doesn’t begin until October 1st. Therefore, Camping’s new predication that the world will end on October 21st is much more plausible.
Yesterday the House Appropriations Committee’s subcommittee that deals with agriculture and nutrition programs passed its bill, which will now be considered by the full committee. According to the committee’s numbers, discretionary funding for these programs in 2012 would be $17.2 billion – a $2.7 billion reduction versus 2011.
According to a statement released by the subcommittee’s ranking member, Sam Farr (D-CA), the four horsemen are readying their saddles:
Farmers will be broken. Jobs will be lost. Ag economies will crumple.
Wow, even though “the farm economy [is] booming”? I half expect to see Rep. Farr waving a “The End is Near!” sign from a street corner in early October.
The Associated Press reports that “hunger advocates” are particularly upset by an 11 percent funding reduction for the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC). (“Hunger advocates” is the AP’s bizarre term for advocates of federal welfare programs.) The AP cites an estimate from a group of “hunger advocates” that the cuts could deny benefits to 475,000 people otherwise eligible for WIC.
If you’re looking for Republicans to defend the cuts on the basis that there’s nothing “progressive” about depending on a federal bureaucracy for sustenance then you’re going to be disappointed:
Republicans who wrote the bill said the cuts in domestic food programs are taken from excess dollars in those accounts, and participants won’t see a decrease in services.
Subcommittee chairman Jack Kingston (R-GA) basically says that the cuts are about making the federal government more efficient:
This subcommittee has begun making some of the tough choices necessary to right the ship. We have taken spending to below pre-stimulus, pre-bailout levels while ensuring USDA, FDA, CFTC, and other agencies are provided the necessary resources to fulfill their duties. Our members have worked to root out waste and duplication and, where they have strayed from their core mission, we rein in agencies so they may better focus on the responsibilities for which they are intended. In doing so, we balance the urgent need for fiscal restraint with the necessity to provide an abundant food supply, robust trade, prudent conservation measures, and strong rural communities.
Sorry, congressman, but if the media is going to uncritically report the “women and children will suffer” argument, the “root out waste and duplication” counter-argument isn’t going to win the heart of the average American who probably thinks WIC is something that comes out of a candle.
For all the angst over cuts to discretionary spending, I don’t see much discussion over the fact that, according to Republicans, mandatory spending for agriculture and nutrition programs will increase by $3 billion – from $105 to $108 billion. Spending on food stamps, which unlike WIC, is basically on auto-pilot, would increase by almost $6 billion. I’m guessing that the “hunger advocates” didn’t plug that number into their equation.
I’ll end on a positive note by pointing out that Cato’s Downsizing the Federal Government website has essays on why it would be truly “progressive” to eliminate farm subsidies, rural subsidies, food subsidies, and other federal welfare programs.
USDA’s Budget Boom
Spending at the U.S. Department of Agriculture will be an estimated inflation-adjusted 43 percent higher this year compared to just a decade ago. The following chart shows the dramatic rise in USDA spending from fiscal 1970 to the president’s projection for fiscal 2011:
Most folks probably think of farm subsidies when they think of the USDA. However, farm programs only account for 19 percent of total USDA outlays. The vast majority of USDA spending, 69 percent, goes to food subsidies: food stamps, school breakfast and lunch programs, and the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC). In fact, spending on food stamps alone this year will account for roughly half of total USDA spending.
Why aren’t these programs housed at the Department of Health and Human Services, the government’s chief welfare bureaucracy? The answer is politics, of course. Every five years or so Congress passes a new “farm bill,” which updates or sets the agenda for USDA programs and policies. Stuffing welfare programs in with traditional farm subsidies engenders broad legislative support for the total legislative package. Including food subsidies helps secure votes from urban and suburban legislators who would otherwise have little or no incentive to vote for farm subsidies.
See here for more on downsizing the Department of Agriculture, including both farm and food subsidies.
This Should Make You Nervous
From today’s edition of Farmpolicy.com:
The American Farm Bureau Federation, the National Cattlemen’s Beef Association, and the American Sugar Alliance all recently expressed delight that Kansas GOP Senator Pat Roberts will be the new Ranking Member of the Senate Agriculture Committee.
The Real Scandal of Farm Subsidies
When the Washington Post published a story in 2007 about how dead farmers had received farm subsidies to the tune of over $1bn, most people were horrified (even “farm subsidy moderate” Rand Paul thought they should go!). Although the article made clear that “most estates are allowed to collect farm payments for up to two years after an owner’s death,” and that the payments weren’t necessarily fraudulent, outrage ensued.
But a follow-up investigation by the USDA has found that all but about $1 million of the payments were completely above board. From the Associated Press:
A 2007 report that the federal government had paid $1.1 billion in subsidies to dead farmers sparked an outcry and has been frequently cited by critics who considered the payments a blatant example of wasteful spending. But a follow-up that found no fraud and determined nearly all the subsidies paid on behalf of dead farmers in recent years were proper has received little attention.
According to the U.S. Department of Agriculture’s Farm Service Agency, just a little over $1 million out of the billions of dollars paid in subsidies in 2009 went to estates or business entities that weren’t entitled to them.
“Very little money is going to individuals who have not earned that money. Very little is being paid in error because a farmer has passed away,” FSA Administrator Jonathan Coppess told The Associated Press. [emphasis mine]
Don’t you just love how Mr Coppess uses the word “earned” there?
That’s the real scandal of farm subsidies, readers. Not that they are fraudulent (although that is of course an outrage), but that they are, for the most part, perfectly legal.
RSC Silent on Farm Subsidies
Confirming my ongoing skepticism about the committment of self-identified fiscal conservatives, especially when it comes to cuts to programs that benefit their constituencies, Politico last night posted an excellent story about the Republican Study Committee’s silence on farm subsidies:
Net cash farm income for 2010 is projected to finish near $92.5 billion — a 41 percent increase even after subtracting payments from the government. Yet conservatives are almost tongue-tied, as seen last week with the Republican Study Committee’s proposal to eliminate relatively modest subsidies for an organic food growers program without mentioning the nearly $5 billion in much larger government direct payments to farm country — including to the home districts of many of the RSC’s members.
Indeed, 24 of the RSC’s estimated 165 members hail from the House Agriculture Committee, and total annual direct payments to their districts run more than $1.09 billion a year, according to a POLITICO review of data compiled by the Environmental Working Group.
Farm groups aren’t exactly in a rage to offer up their programs for reform, but the National Association of Wheat Growers at their winter board meeting last week gave us plenty of evidence, as if more were needed, that support for the status quo is solid. An interesting nuance is their argument that, if they do “contribute” to deficit reduction, they won’t be “giving” more than anyone else, thank you very much:
NAWG supports the policy that if federal agriculture programs are subject to budget cuts to achieve deficit reduction, then the same percentage of cut should apply to all federal government programs.
While I might think that almost all areas of the federal budget need be cut, I just don’t buy the argument that farm subsidies are no more damaging, and therefore shouldn’t be cut more, than any other areas of government intervention. The federal government, in my opinion, has a role to play in limited and defined areas of public life. I strongly disagree with the NAWG’s implication that farm subsidies are just as important/necessary as, say, public funding for national defense or for the control of infectious disease.
Surprise, Surprise
Last year I wrote about the intriguing proposal by the North Dakota Farm Bureau to do away with federal farm subsidies. I expressed at the time my doubt that the proposal would find much traction with the national American Farm Bureau Federation and, indeed, the group voted yesterday (at their annual conference in Atlanta) against the milder proposition to cut direct payments — the approximately $5.2 billion per year of your money that flows to farmers regardless of what, or even whether, they farm. Those payments are becoming increasingly politically contentious at a time of growing unease about record deficits, and some farm groups had said defending (let alone receiving) them was a threat to farmers’ broader interests.
Well, despite some discord among the group, the AFBF — you’ll be shocked, shocked to hear — voted largely for the status quo. From Brownfield (in an article that contains interesting analysis of how support for various programs breaks down on state/regional lines):
By a comfortable margin, the delegates passed a resolution calling for ‘a strong and effective safety net that consists of direct payments, crop insurance and a simplified Average Crop Revenue Election (ACRE) program.‘
Hopefully Congress can prove me wrong and cut farm subsidies when the farm bill comes up for renewal in 2012.
Post-Election Outlook: Agriculture Edition
My colleagues have done a thorough job of analyzing the policy implications of Tuesday’s federal election outcome as it affects trade policy, health care, immigration, education, and the scope and size of government generally (more here on federal spending). Most of them are cautiously optimistic that a Republican-controlled House is good news for liberty-minded folk. Let’s hope so.
Unfortunately, there are fewer obvious reasons for optimism that Tuesday’s result will mean big changes in agricultural policy, a depressingly bipartisan area of federal intervention. Even Rand Paul, the poster child for the Tea Party, expressed “moderate” views on farm subsidies during his campaign.
On the positive side of the ledger, our friends at the Environmental Working Group make the excellent point that being a friend of Big Farming was not enough to shield many Democrats from defeat. Earl Pomeroy (D, ND) represents the congressional district that ranks Number One in farm subsidy receipts (now there’s a source of pride!) and even he got the boot. As did Senator Blanche Lincoln, chairperson of the Senate Agriculture Committee and shameless architect of a bailout package for farmers that was funded we-don’t-exactly-know-how. At least 15 (possibly 16 if Rep. Jim Costa (D., CA) loses his too-close-to-call race) Dem members of the House Agriculture Committee — friends of the farmer all — are now looking for work. In other words, support for Big Ag is not a sufficient shield.
On the other hand, it’s not clear that their replacements are an improvement as far as agriculture policy is concerned. With a new farm bill due to be written in 2012 (although soon-to-be-former House Agriculture Committee chairman Collin Peterson (D., MN) was trying to get that ball rolling earlier), it is not certain that the fiscal conservatism exhibited during most Republicans’ campaigns extends to farm policy. Indeed, probable new House Agriculture Committee chairman Frank Lucas (R., OK) has said he disagrees with getting rid of the fiscally offensive (but less trade-distorting) direct payments that flow to farmers regardless of what, or even whether, they farm. That was an area of reform that Collin Peterson was at least willing to look at. (More on the implications for direct payments here).
Chuck Abbott, agriculture reporter for Reuters, has more analysis on the outlook for farm policy. His is a more optimistic take, and I hope he’s correct. For my part, my skepticism is based on statements such as those by the CEO of the Renewable Fuels Association, speaking on a conference call yesterday:
[F]or the most part those that may have been defeated were replaced with equally strong advocates for value added agriculture and ethanol. Does anyone believe that Kristy Noem (R-SD) will not be a strong voice for ethanol?
Exactly. The fight’s not over yet, folks.
Good Time to End Farm Subsidies
The Wall Street Journal reports that the agricultural sector is recovering nicely from the recent recession while the rest of the private sector continues to struggle. The counter-cyclical nature of some farm subsidy programs means that the taxpayer bill for the year could be cut in half to only about $12 billion.
From the article:
For many crops, prices are climbing even as big harvests pile up, a rare combination. Farmland values are up while those for some other kinds of real estate languish. Debt on the farm is manageable. Incomes are rising.
And trade, of which many Americans are growing wary, is for agriculture a boon. Asia’s economic vigor and appetites make the farm sector’s reliance on exports—once thought a vulnerability in some quarters—a plus today.
“The farm economy is coming out of the recession far faster than the general economy,” said Don Carson, a senior analyst.
The WSJ article also notes that farmers will still receive direct payments of about $5 billion for basically just being farmers. This subsidy is particularly insulting to taxpayers as the program was created in 1996 to help wean farmers off of subsidies. Instead, these “temporary” payments were turned into a permanent hand-out in 2002.
Better news for taxpayers would be the abolition of farm subsidies. While they obviously remain popular with the beneficiaries and their patrons in Washington, the general public seems to be increasingly aware that the subsidies amount to little more than legalized theft.
What the Estate Tax Does to Farmers
A graphic representation (from the Bloomington, Ill. Pantagraph and via the American Family Business Institute’s Twitter account).
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