State Association Weekly Washington Report 11.16.17

Congress Goes Away Next Week for Thanksgiving; AFBF Says the Feast is Cheaper this Year

Congress will take a long break next week to celebrate the Thanksgiving holiday, and this week, the American Farm Bureau Federation (AFBF) released its annual survey showing the cost of the annual feast will be the lowest since 2013. The total cost of a Thanksgiving dinner for 10 people will be $49.12, 75 cents less than in 2016.

That turkey – in this case a 16-pound bird – will average about $22.38 this year. That’s roughly $1.40 per pound, a decrease of two cents per pound. Other foods showing large price drops are a gallon of milk, $2.99; a dozen rolls, $2.26; two nine-inch pie shells, $2.45; a three-pound bag of sweet potatoes, $3.52; a one-pound bag of green peas, $1.53; and a group of miscellaneous items including coffee and ingredients necessary to prepare the meal (butter, evaporated milk, onions, eggs, sugar and flour), $2.72.

Full House Approves Tax Reform Bill 227-205; Senate Finance Committee Approves Tax Bill

True to his word and right on the money when it came to a vote count, House Speaker Paul Ryan (R, WI) this week saw his party’s $1.5-trillion version of federal tax reform approved by the full chamber on 227-205 vote – the GOP prediction earlier this week was “between 225 and 230” – and the deal was done well before Thanksgiving as promised.

Meanwhile, Sen. Orrin Hatch (R, UT), chair of the Finance Committee, led four days of committee debate and markup on his chamber’s version of federal tax reform, ultimately moving the bill to the full Senate on a 14-12 party line vote. Hatch said the bill will be on the Senate floor after Congress’ Thanksgiving recess next week.

While Democrats on both sides of Capitol Hill refused to vote for the GOP tax bills, Ryan lost an expected 13 Republican House members who also voted “nay.”Democrats strongly slammed both bills as “gifts” to the wealthiest taxpayers, and moves that will complicate the federal tax code, not simplify it as Republicans claim.

The 13 GOP “nay votes are lawmakers are from so-called “high-tax” states – California, New York, New Jersey, Illinois, etc. – and object to the bill’s shift in tax rates and deductions, saying the House treatment of federal deductions for state and local income and sales taxes works against their citizens.

The developments are major steps forward in the GOP push to enact a tax bill – the first since 1986 – by the end of the year. One veteran tax lobbyist reminded observers the bills approved this week will likely bear little resemblance to the bill that could emerge from conference committee.When the Senate markup finished, Agriculture Committee Chair Pat Roberts (R, KS), who is also a member of the Finance Committee, said the bill protects key tax provisions important for farmers and ranchers, while at the same time cutting tax rates significantly.

Hatch released the committee’s markup version of its original bill which included some major shifts in direction, including inclusion of language to repeal the Obamacare individual insurance mandate. The bill also temporarily cuts personal tax rates, but permanently slashes the corporate rate from 35% to 20%. Included were several changes designed to be “agriculture friendly,” mirroring last-minute changes made in the House bill.

Also included in the modified Senate bill is retention of Sec. 179 deductions and “bonus depreciation,” a combination that protects new asset purchases deductions, including those for equipment. The Senate bill would increase the current $500,000 cap on such deductions to $1 million a year, but restrict the write off to new purchases.

As in the House bill, the Senate version retains 100% expensing, but the Senate limits the benefit to five years, whereas the House makes the expensing provision permanent. Also on the expensing side, new language will allow cattle feeders to continue writing off interest expense if there ineligible for other small-business exemptions in the bill.

On the estate tax, the Senate did not follow the House in repealing the so-called “death tax” outright. It raises the exemption limit on estates to $11 million, but leaves the tax on the books. The Senate followed the House in eliminating the Sec. 199 deduction, a benefit important to agricultural cooperatives, which pass about $2 billion a year in benefits back to their members. Roberts said new language in the Senate bill designed to protect “pass-through” businesses – partnerships, sole proprietorships and S-corporations – creates a new deduction that replaces the benefit to co-ops lost by ending Sec. 199 deductions. The National Council of Farmer Cooperatives (NCFC) says the new language doesn’t fully replace the lost benefit, and delivered a letter to the Finance Committee signed by 179 ag groups and companies asking the deduction be retained.

The Senate bill, like the House version, restricts business interest deductions based on a company’s size, with the Senate imposing a $15-million gross asset test it says will take in most small to medium-sized farming/ranching operations.

“We haven’t had an overhaul of the burdensome federal tax code since the mid-1980s, and it’s well past time to provide relief to workers and their families,” said Agriculture Secretary Sonny Perdue after the House vote.

Perdue Continues with USDA Reorganization Action Plan; GIPSA, Grain Inspection Move to AMS

After putting some components of his department reorganization plan on hold pending “further review,” Agriculture Secretary Sonny Perdue kicked his reinvention of USDA into high gear, finalizing the move of the U.S. Codex Office to the new undersecretary for trade and foreign affairs, and making good on his plan to eliminate the Grain Inspection Packers & Stockyards Administration (GIPSA) as a stand-alone agency. All changes are effective immediately.

GIPSA functions will move under the umbrella of the new “Fair Trade Practices Area” – Perishable Agricultural Products Act (PACA), Country of Origin Labeling program, the Bioengineered Labeling Program, etc. – as part of the Agricultural Marketing Service (AMS) and to AMS’ Federal Grain Inspection Service (FGIS). Also being moved are the Warehouse Act programs. Perdue’s reorganization memo says the grain inspection activities will be included in the new program arrangement and will be overseen by the AMS deputy administrator for FGIS.

When first announced in September, Perdue said he would put the GIPSA and Codex moves on hold out of questions raised by stakeholders.

On the GIPSA move, the National Sustainable Agriculture Coalition (NSAC) condemned the moving of Packers & Stockyards Administration programs saying it’s concerned about lost protections for farmers and ranchers when it comes to packer/integrator contracting practices. This sentiment was echoed by the Ranchers-Cattlemen Action Legal Fund (R-CALF). The Organization for Competitive Markets (OCM) said, “We are stunned that Secretary Perdue continues to erode farmers’ and rancher’s anti-monopoly protections.”

In moving the Codex Office, Perdue made changes in the shift to ameliorate concerns from several groups that moving Codex out of the Food Safety & Inspection Service (FSIS) would expose the international food safety standards function of Codex to politicization. FDA came out publicly against the Codex office move, concerned the non-science Codex venue within the trade program area “would build the perception the U.S. places a strong priority on advancing trade over public health.” The Codex policy committee will continue to be chaired by the as-yet unnamed undersecretary for food safety, while Undersecretary for Trade & Foreign Affairs Ted McKinney will take the vice chair seat. McKinney, however, will have overall administrative authority over the office.

Blumenauer’s “New” Farm Bill Sees “Overhaul” of Income Safety Net, Conservation Programs

Rep. Earl Blumenauer (D, OR) wants to see commodity “subsidy” programs eliminated for some farmers, and conservation programs reworked, while adding new sections to a 2018 Farm Bill dealing with animal welfare and food waste, according to a Blumenauer “farm bill” introduced this week.

Blumenauer, who is known for his bow ties and commutes to Capitol Hill on his bike, and is described by one reporter as representing one of the most “liberal enclaves” on the West Coast, said at a press conference to unveil his plan, “I’ve been working on farm bill issues since I was first elected, and we’ve had some mixed success, in part because I made a mistake dealing with little bits and pieces while established farm interests have a plant they’re supporting. This bill is an attempt to try and turn that around.”

While the Humane Society of the U.S. (HSUS), the American Society for the Protection of Animals (ASPCA), the Union of Concerned Scientists (UCS) and the Environmental Working Group (EWG) were part of the press conference unveiling the Blumenauer bill, the “keynote speaker” was “Omnivore’s Dilemma” author Michael Pollan, a former journalism instructor at UC-Berkeley, who said the 2018 Farm Bill is the most important food, health and environmental bill that will come before Congress next year. The bill also drew praise from Rep. Rosa DeLauro (D, CT) and Rep. Chellie Pingree (D, ME), who also attended the press conference.

“For the sake of our farmers, planet, fiscal sanity, and our health, we can’t afford to continue the status quo. We saw firsthand today that there is a growing movement to improve our food and farm policy for all Americans,” said Blumenauer. “It’s time Congress pays attention to what the people want and reforms the Farm Bill now.”

According to his press release, Blumenauer’s “Farm & Food Act” seeks the following farm policy/program changes:

  • “Cut, cap, and clarify” the existing farm subsidy programs that are available in the commodity, conservation, and crop insurance titles of the Farm Bill;
  • Reform existing conservation programs by distributing resources based on how effectively a project achieves conservation goals and minimizes environmental impact;
  • Give greater flexibility to food assistance programs, allowing the United States the ability to feed more people in more places;
  • Invest resources to expand access to healthy food in underserved areas, in schools, and at farmers’ markets;
  • Provide support for beginning farmers and ranchers to enter and stay in the agriculture sector;
  • Establish the first Food Waste Title of the Farm Bill to focus the federal government on food waste reduction;
  • Invest in research and education programs that improve sustainable agriculture practices;
  • Establish the first Animal Welfare Title in the Farm Bill to ensure that the treatment of animals is a central part of the country’s agriculture policy, and
  • Invest in existing programs and create new initiatives that support vibrant local and regional food systems.

NAFTA Notes

Ross Hits Ag for “Screaming and Yelling” Over Administration NAFTA Talk – Adding insult to injury this week, Secretary of Commerce Wilbur Ross, the Trump administration’s lead trade appointee, told the Wall Street Journal’s Washington, DC, CEO Council meeting, “As one special interest group, say agriculture for example, gets nervous they start screaming and yelling publicly. They start writing letters, soliciting the Congress people and they start yelling and screaming in public. It just complicates the environment and, frankly, makes the negotiations harder.” This after Ross publicly called agriculture’s warning of the economic damage if the U.S. pulls out of NAFTA an “empty threat,” allowing other markets would be found for lost sales to Canada and Mexico. Agriculture increasingly distrusts the administration’s dedication to actually finalizing a renegotiated NAFTA given President Trump’s public statements about pulling out of the 23-year-old treaty.

Trump Will Get Reworked NAFTA Deal: Ross – Saying the U.S. goal is having a draft NAFTA 2.0 treaty in hand by March, 2018, Commerce Secretary Wilbur Ross continued to fan the flames of uneasiness over the treaty’s ultimate future when he told a Washington, DC, business meeting, that he remains confident U.S. negotiators will deliver a modernized NAFTA to President Trump. “It won’t be that nothing lands on his desk; something will land on his desk,” Ross said. “His general point of view is no deal is better than a terrible deal,” explaining once he’s got the draft, Trump will face a “binary decision” on the treaty’s future. In the same vein this week, the U.S. Chamber of Commerce told a Canadian audience NAFTA success “is attainable, but only if the U.S. takes withdrawal off the table and reverses course on proposal categorically opposed by U.S. agricultural and business interests small and large.”

Top Negotiators Not in Mexico City for NAFTA Round 5 – “So negotiations can continue to make important progress on key chapters advanced in Round 4,” the U.S., Canada and Mexico this week issued a joint statement on why their respective A Teams won’t be in Mexico City for the latest round of NAFTA 2.0 talks. The announcement came after U.S. Special Trade Representative (USTR) Robert Lighthizer, Canadian Foreign Minister Chrystia Freeland and Mexican Economic Minister Ildefonso Guajardo met last weekend during the Asia Pacific Economic Cooperation (APEC)leaders’ summit in Da Nang, Vietnam. Insiders say one goal of Round 5 talks is to find out just how wiling the U.S. may be to compromise on several proposals put on the table which have been rejected out of hand by Canada and Mexico. The latest round formally begins November 17, but informal discussions began November 15.

Industry Calls on Lighthizer to Protect NAFTA Trucking Provision-- A cross-border reciprocal trucking provision in NAFTA which gave President George W. Bush no end of headaches, must be preserved, according to a letter signed by over 100 industry groups and sent to USTR Robert Lighthizer this week. Agriculture, manufacturing, retail and transportation groups and companies signed the letter which calls for a “reservation for cross-border trucking in Annex II” of the treaty, a provision that allows the U.S. to move later to institute domestic actions to restrict Mexican trucking access to the U.S. without violating NAFTA. The current language allows Mexican truckers to operate outside the so-called “commercial zone” that extends 20 miles north of the U.S.-Mexican border. In 2011, the Obama administration set up a pilot program that has certified 34 Mexican trucking companies to operate outside the zone. Overall, the letter says, the cross-border program has allowed both the U.S. and Mexico to “safely and efficiently haul our products in both countries.”

EPA Developments

Ag Groups, Monsanto Sue Over Glyphosate in California –Glyphosate maker Monsanto, joined by the National Association of Wheat Growers (NAWG), National Corn Growers Assn. (NCGA), the Missouri Farm Bureau and the Iowa Soybean Assn., filed suit in federal court in California to stop the state from listing glyphosate as a carcinogen under its Prop 65 law. The basis for the Prop 65 action is the International Agency for Research on Cancer’s (IARC) determination that glyphosate is probably carcinogenic, and the California law requires any substance so defined by IARC to carry a carry warning. The groups are alleging First Amendment violations, violation of the “due process” clause of the 14th amendment, and violation of the “supremacy clause.” The groups say the Prop 65 action “compels speech that is false and misleading” given IARC’s opinion of glyphosate is unsupported by any other regulatory or scientific evidence.

EPA Moves to Formally Delay WOTUS – Just in Case…-- EPA this week, joined by the U.S. Army Corps of Engineers, moved to delay the effective date of the final Obama administration “waters of the U.S. (WOTUS)” rule just in case the Supreme Court lifts the existing federal stay on implementation. At issue is a case to be heard by the high court over whether federal appeals court or federal district court is the proper venue in which to argue cases related to federal challenges to WOTUS. If the Supreme Court decides the WOTUS cases must first go through district court, then the current stay disappears, creating confusion as a separate stay would protect 13 states, but the rule would automatically become effective in the other 37 states.

Another $44 Billion for Disaster Aid to be Requested

The White House this week will request of Congress another $44 billion in aid to assist storm, flood and wildfire victims in Texas, Florida and Puerto Rico, according to multiple reports, and would bring to almost $100 billion the amount of aid the federal government will provide to disaster victims.