Iowa Public Television


Congress Approves $137 Billion Tax Bill

posted on October 15, 2004

Record supplies and uncertain demand are fueling a bearish trend in soybean prices -- a fact that has not gone unnoticed by commodity funds.

According to the Commodity Futures Trading Commission, the funds are at an all-time record short position in soybeans.

Some analysts claim the funds' positions are not the leading indicator in the market and suggest that fundamentals are the real market movers.

Nevertheless, with the outlook for rising prices questionable at best, soybean producers will take any good news they can get.

This week, the beacon of hope was in Washington, where Congress approved a massive tax bill, containing among other things, the first tax incentive for biodiesel.

Congress Approves $137 Billion Tax Bill Prior to adjourning for the November elections, the U.S. Senate this week passed the American Jobs Creation Act of 2004. The $137 billion measure represents the largest overhaul of corporate taxes in nearly 20 years.

The main provision of the 633-page bill repeals subsidies for U.S. exporters that had been ruled illegal by the World Trade Organization.

The bill provides more than $76 billion in tax relief for the manufacturing sector over the next ten years. It also includes numerous provisions benefiting oil companies, timber producers and farmers.

Included in the bill are several key agriculture-specific tax initiatives. They include:

-Extending the current 5.2 cent per gallon ethanol tax credit through 2010.

-A new tax incentive for biodiesel. Based on USDA estimates for future soybean production, the biodiesel provision alone could add up to $1 billion directly to U.S. farmers over the next five years.

-And a $10.1 billion buyout of the federal tobacco subsidy program financed by the tobacco industry.

Despite the $137 billion dollar price tag, lawmakers claim the tax bill is revenue-neutral since its costs are offset by cutting tax loopholes.

Proponents of the tax bill, including Republican Senator Charles Grassley of Iowa, claim the sweeping tax reforms will help American businesses compete in the global marketplace.

But critics of the legislation claim lawmakers handed out scores of corporate tax breaks and rejected provisions that could have helped the middle class. Arizona Republican Senator John McCain called the bill "the worst example of the influence of special interests he had ever seen."

The measure now goes to President Bush who is expected to sign the bill into law.

Tags: Congress ethanol news tobacco