Press Releases

Duncan Introduces Bill to End ‘Cadillac’ Crop Insurance Subsidy

Press release from U.S. Rep. John Duncan, Jr., R-Tenn. 02; February 12, 2015:

Congressman John J. Duncan, Jr. (R-Tenn.) introduced bipartisan legislation Thursday to eliminate a little-known “Cadillac” crop insurance subsidy that costs taxpayers billions of dollars each year and is used mostly by large corporate farmers.

The Harvest Price Subsidy Reduction Act would end taxpayer support for harvest price option insurance plans.  The measure is supported by a wide range of taxpayer watchdog groups and would save $19 billion over 10 years.

Under a traditional crop insurance plan, farmers purchase a policy that pays out if they earn less money at harvest time than they were projected to make when they planted their crop. It is meant to be a safety net to protect farmers from catastrophic and unanticipated losses.

Under harvest price option plans, however, if the crop ends up higher than projected, the farmer is paid out at that higher price.  Since harvest price option policies are purchased with taxpayer subsidies, it amounts to taxpayer-subsidized profit guarantees.

“Our crop insurance system is not fair to the 99-percent of business owners in my District who do not get subsidies from the federal government to run their business,” Duncan said. “Big agro businesses and insurance corporations have a sweetheart deal.  The largest corporate farms collect the lion’s share of the money, creating an unfair playing field for small, family farmers. It’s crony capitalism at its best.”

“Of the 20 largest crop insurance companies operating in the U.S., eight are foreign-owned and have been receiving U.S. taxpayer money to provide these policies,” Duncan continued.

Under the bill, farmers could continue to purchase harvest price option insurance policies, just without taxpayer subsidy support.

Sen. Jeff Flake (R-AZ) and Sen. Jeanne Shaheen (D-NH) introduced a companion bill in the U.S. Senate.

“Making a living in agriculture is not easy or predictable. That’s why there are safety net programs like traditional crop insurance,” said Flake. “But HPOs are not safety net programs: They put taxpayers on the hook for billions of dollars even when huge profits are being made.”

The Crop Insurance Subsidy Reduction Act is supported by the following groups: Heritage Action; American Enterprise Institute; R Street Institute; Club for Growth; National Taxpayers Union; Campaign for Liberty; Taxpayers Protection Alliance; Center for Individual Freedom; Coalition to Reduce Spending; Less Government; and the Environmental Working Group.

Read a joint letter of support from these organizations HERE.