Lowering Premium Subsidies for Large Farm Businesses is Common Sense

crop insuranceLowering Premium Subsidies for Large Farm Businesses is Common SenseSupport Durbin-Grassley amendment to strengthen crop insurance

Agriculture,  | Quick Take
Jun 27, 2018  | 3 min read | Print Article

The Senate is likely to soon consider an amendment to the farm bill to reduce crop insurance subsidies for the wealthiest farmers. The amendment, co-sponsored by Senators Dick Durbin (D-IL) and Chuck Grassley (R-IA), would reduce the level of federal premium subsidy for crop insurance by 15 percent for individuals that have an Adjusted Gross Income (AGI) over $700,000 ($1.4 million for married couples).

Under the federal crop insurance program, farm businesses can purchase crop insurance policies guaranteeing they make up to 85 percent of their anticipated revenue. And federal taxpayers currently pay, on average, 62 percent of the premium costs for these generous policies. This amendment would simply reduce the taxpayer burden to subsidize premiums for businesses that make over $700,000 a year after deducting their costs of doing business. Currently, crop insurance is the only agricultural income entitlement program that does not include an income test or payment limit.

Special interests representing the crop insurance companies and crop insurance agents are sowing fear in an attempt to block farm safety net reform amendments. Big crop insurance companies state that any reduction in subsidies will cause large farms to abandon subsidized crop insurance, leading to a higher risk pool and increased costs for smaller producers.

This is bogus.

  • The USDA Economic Research Service foundthat the biggest farmers would not leave the program just because of a small subsidy cut.
  • The Congressional Budget Office also discoveredthat farm couples with an AGI greater than $1 million would not exit the program if premiums were reduced by 15 percent.
  • Even if large operations abandoned their economic interest and left the program, the Government Accountability Office saidthis would not impact other farmers buying crop insurance because less than 1 percent of farmers would be impacted by the AGI limit.

Farmers and ranchers are too good of businessmen and women to abandon crop insurance simply because of a trim in subsidies. What business would leave $85,000 on the table because they are upset they don’t get an additional $15,000?

When meat gets expensive, people don’t suddenly become vegetarians. When the porterhouse gets too pricey, people opt for pot roast. Beef is too expensive? People buy chicken instead. Same thing here. Lawmakers need to ignore the crop insurance chicken littles and cut the crop insurance fat.

For more information on the Durbin-Grassley amendment, click here.