Farm-state congressmen have received their first look at legislation that may help the Senate bridge the gap between the budget baseline and the “wish lists” of farm and conservation groups for the 2007 farm bill.

Senate Finance Committee Chairman Max Baucus, D-Mont., announced he plans to offer an agricultural tax package that would create a permanent trust fund for disaster relief programs and create tax credits and other incentives for conservation and rural development efforts.

“America's farming and ranching families give their all to grow food, fuel and other necessities for our nation, and our agriculture legislation will offer real support to hardworking producers,” said Baucus.

He said the Finance Committee would act in the next weeks to report out $8 billion to $10 billion in new agriculture-related tax proposals.

Iowa Sen. Tom Harkin, chairman of the Senate Agriculture Committee, said he welcomed Baucus' announcement, adding that as a member of the finance and agriculture committees Baucus understands “our difficult budget situation.”

Harkin has said the budget issue is the primary reason his committee has not yet met to mark up a new farm bill even though the House passed its version of the legislation at the end of July.

“We are continuing discussions regarding both the details of the finance committee's ideas and the level of funding help they would provide toward the farm bill,” he said in a statement.

“We still have a way to go in these discussions in order to meet crucial needs for farm income protection and investments in conservation, nutrition, energy, rural development and specialty crops initiatives.”

Last April, Congress approved the fiscal 2008 budget resolution that included a $20 billion reserve fund for new farm bill spending over the next five years. The resolution also said any new spending — above the baseline — must be deficit-neutral, meaning it would have to be offset by spending cuts in other programs or increasing taxes.

The Congressional Budget Office, whose baseline budget serves as the benchmark for the fiscal 2008 budget resolution, projected spending for commodity support payments to be $42.4 billion for the 2008-13. That figure is about $30 billion lower than the last six years.

Harkin has said he may need as much as $20 billion to fund a bill that will win enough votes to pass the Senate Agriculture Committee and the Senate. He said ag committee members have been meeting for two months to discuss ways to obtain the funding.

Baucus' tax package would include a permanent agriculture disaster relief trust fund that could help ranchers and farmers and encourage banks to extend credit as needed. It would provide an ongoing program to offset farming income losses not covered by the crop insurance program.

Harkin and Baucus reportedly disagree on the disaster assistance trust fund proposal with Harkin contending that a revenue counter-cyclical program tied to crop insurance would provide a better safety net for producers.

“We've run the numbers on this and, frankly, it's better for every state,” Harkin said, referring to payments that would be made when farm revenues drop below state-level figures. The current counter-cyclical payments are tied to crop prices.

Also in the Baucus proposal:

  • Tax credits for conservation programs. Participants in farm bill conservation programs, such as the Wetland Reserve Program, the Grassland Reserve Program and the Farm and Ranchlands Protection Program, currently receive cash payments. The finance committee proposal would allow participants in some conservation programs to choose to receive tax credits instead, freeing up “significant” funds for other programs.

  • Rural development bonds. The proposal would create a new category of tax credit bonds for projects such as rural electric and telemedicine, rural broadband and other rural community projects.

  • Energy conservation tax incentives. The finance committee-approved Energy Advancement and Investment Act of 2007 included several provisions, including tax incentives for wind energy and other alternative energy sources and to encourage growing alternative crops used to make ethanol, biodiesel and cellulosic fuels.

The bill would also clarify that Conservation Reserve Program payments made to certain farmers participating in mandatory conservation activities are rental income, and not subject to self-employment taxes.

Speaking on his weekly telephone conference call with reporters, Harkin said he was disappointed farm groups had not been more supportive of his efforts to increase funding for conservation programs.

Baucus said he expects the finance committee to act on the tax proposals in the next few days. That may not be soon enough for Harkin, who had scheduled a mark-up session for the Senate ag committee the week of Sept. 17 and then canceled it.

Harking indicated that if the Finance Committee does not act quickly, the agriculture committee would meet in late September to draft a farm bill with little additional funding.

“We will have to jiggle some things around,” he told reporters, noting that some savings could be achieved by revamping federal crop insurance and passing tighter payment limit rules.