Wasteful farm policy

As the House prepares to debate the re-authorization of the farm-policy bill later this week, the Government Accountability Office (GAO) is scheduled to release a report today detailing the seemingly routine practice of paying farm subsidies to dead people, some of whom apparently did little, if any, farming while alive.

From a group of 181 cases between 1999 and 2005, the GAO report, according to The Washington Post, cites a corn and soybean farm in Illinois that collected $400,000 in subsidy payments on behalf of an owner who lived in Florida, who died in 1995, and who was certified each year after his death by the Illinois company to be “actively engaged” in farm management. As a result, the taxpayer-financed subsidies continued to flow on his behalf. The company, 40 percent of which had been owned by the deceased shareholder, neglected to notify the federal government that the owner had died. And the Agriculture Department does not check Social Security records or other databases to confirm eligibility.

We have been hearing for decades about all the “family farms” that supposedly have had to be sold to pay the death tax, although farming interest groups seem unable to provide examples. Indeed, two years ago the New York Times reported that the American Farm Bureau Federation had not cited a single example of a farm being sold to pay estate taxes. However, it turns out, as the GAO reports, that subsidies are routinely paid to estates for up to two years after the owner dies. That reasonable policy enables the heirs to probate the will and restructure the business. The GAO found several cases in which beneficiaries of the estate were able to collect more than the $360,000 limit in annual farm subsidies received by the individual before he died. USDA acknowledged that an extended family could pursue such a scheme by keeping an estate active for years after the farmer died. Over the 1999-2005 period, about $750 million of the $1.1 billion in questionable payments to estates and companies whose owners died went to entities carved up so that beneficiaries could legally exceed the $360,000 limit.

After the two years during which heirs continue to receive subsidy payments, the USDA must certify each year that the estate continues to operate the farm for reasons beyond the taxpayer subsidies it may generate. Unfortunately, the GAO reports that the USDA regularly fails to conduct the required investigations to make certain the subsidy checks are properly issued. From its sample of 181 cases, GAO auditors found that 40 percent were never reviewed. The GAO identified “weaknesses” in another 38 percent of the cases (we are now talking about nearly four out of five estates), which were so haphazardly reviewed that there was “nonexistent or vague” documentation.

Let the farm-policy debate begin.