How Sweet It Isn’t, Clinton Learns After Sugar-Beet Veto

Whoops! That’s how some Clinton administration political allies may have felt on Monday after President Clinton vetoed a special tax sweetener for sugar-beet farmers, only to see his action quickly sour.

At first blush, the tax measure no doubt looked like a perfect candidate:

Congressional calculations suggested the major beneficiary was likely to be Dallas millionaire Harold C. Simmons, a onetime corporate raider who recently sold a sugar-processing plant to a farm cooperative in Oregon.

Sugar-beet farmers already receive a huge federal subsidy--import quotas on foreign-grown sugar--that enables them to keep domestic prices far higher than they otherwise could.

And Simmons has been a heavy contributor to Republican political causes, at a time when Clinton and the Democratic National Committee are under fire for receiving foreign campaign contributions.

Within minutes after the veto was announced, however, the White House found itself facing harsh criticism from angry farm organizations, which were counting on the new law to help farmers expand their business reach.

As it turned out, the provision is a key legislative goal of a wide array of agricultural groups, from the American Farm Bureau Federation to the National Council of Farmer Cooperatives.

And all are now hopping mad.

Moreover, lawyers for the sugar-beet cooperative that the Simmons deal spawned insisted the Dallas businessman would not receive a penny of benefit because the sale was completed too early to qualify under the bill.

“Had this provision been in effect and had we not already completed our transaction, then Mr. Simmons would have benefited,” said John Lemke, general counsel of the Oregon cooperative. “But it was done in December.”

While White House staffers showed no signs of remorse, Clinton’s own comments suggest the decision on whether to include the farm-cooperatives provision in the veto measure was at best a close call.

The president conceded gingerly that whatever its other flaws, the measure was “well intended.” And he pledged to work with lawmakers on a new version that “is better targeted and not susceptible to abuse.”

Whatever the outcome, the machinations served to underscore the difficulty in deciding whether provisions such as this really are special-interest legislation.

As Clinton found out Monday, while even broad-scale farm subsidies may look like special-interest legislation to city dwellers, farm groups regard the co-op provision as a “general-interest” measure.

The provision, introduced by Rep. Kenny C. Hulshof (R-Mo.), would have permitted an individual to defer capital gains taxes on profits from the sale of agricultural-processing facilities to farmers’ cooperatives.

Simmons, who admittedly had been pressing for the amendment before the sale of his Amalgamated Sugar Co. to an Oregon cooperative late last year, clearly would have benefited if it had arrived in time.

But farm groups of all kinds also saw the bill as a broader measure designed to help farmers branch out--from merely growing crops to reaping some of the profits from making finished products, such as corn syrup.

As such, Hulshof exuberantly named it the “agriculture for the 21st century act,” hoping to capture the spirit of farmers’ pushing toward a new frontier.

Hulshof told a press conference in Missouri on Monday that he had no idea when he introduced the bill that Simmons had had anything to do with it. He said the language was suggested by the farm cooperatives’ group.

Agricultural organizations contend farmers need the avenue for extra income because legislation passed last year to phase out farm subsidies leaves them ever more vulnerable to the impact of bad weather.

They say current law already gives a similar tax break to investors who sell businesses to employee stock ownership plans. “This would merely extend that,” asserts Randy Jones, the National Council of Farmer Cooperatives lobbyist.

But critics say the measure has its downside as well. Experts say it was drafted so vaguely that it would have allowed corporations that sell their ventures to farm cooperatives to shelter their profits permanently.

And while it is true that Simmons already has completed his sale, tax specialists say he easily could have taken advantage of the new tax break by selling the stock he owns in the new cooperative and deferring that gain.

Treasury Secretary Robert E. Rubin contended in a briefing that the president and his advisors did not “focus” on the potential benefits for Simmons when they recommended vetoing the measure.

“I don’t know enough about [Simmons’] specific tax situation to know what effect it would have on him, but that was not the basis on which the [veto] decision was made,” Rubin insisted.

It still is not clear whether the president’s veto marks the end of the provision. If the would-be beneficiaries do not challenge the move in court, Clinton may work with Congress to revive it in another form.

Meanwhile, tax specialists around Washington are recalling an old saying of Sen. Russell B. Long (D-La.), who served as chairman of the Senate Finance Committee during the 1970s and wrote many narrow-interest bills.

“Tax reform is in the eye of the beholder,” Long declared.