From: Reuters
Published April 17, 2008 08:52 PM

Ethanol incentives, farm payments may be cut

By Charles Abbott

WASHINGTON (Reuters) - Ethanol tax incentives and crop subsidies including "direct" payments to farmers could be reduced as part of the new U.S. farm law, a House chairman and two Senate staff workers said on Thursday.

House Agriculture Committee chairman Collin Peterson told reporters that $1 billion in cuts in commodity programs over 10 years was an element in the House proposal to offset a spending increase of $9.5 billion. Commodity programs include the direct payments of $5.2 billion guaranteed annually to farmers.

Roughly $6 billion of the offsets would come from a new brokerage basis reporting requirement or similar revenue source, said Peterson, Minnesota Democrat. He spoke to reporters after a meeting of senior House and Senate farm-bill negotiators. The brokerage basis reporting rule would require brokers to report the basis under which securities transactions are made, facilitating tax collection.

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Senate negotiators say they would use the brokerage basis reporting rule to provide $6 billion.

The House package also included $500 million in spending cuts and $800 million in additional tax compliance measures, said Peterson. He said the House plan allowed $2 billion for a disaster relief fund for farmers and ranchers.

Two Senate staffers said the Senate proposed a $2.4 billion tax package, down $100 million from a recent proposal, to be offset by $2.4 billion in savings. The savings would include a 5-cent a gallon reduction in the ethanol blender tax credit and changes in some smaller ethanol incentive programs to provide a total of $1.226 billion, said one aide.

Limits would be placed on net operating losses that could be claimed on agricultural operations to prevent them from being abused as tax shelters, said the aides.

Chairman Charles Rangel of the House Ways and Means Committee said, "We are closer" to agreement on the farm bill.

"There are so many flying pieces here" and several lawmakers who must agree, said Rangel a New York Democrat.

(Reporting by Charles Abbott; editing by Carol Bishopric)

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