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The Spokesman-Review Newspaper
Spokane, Washington  Est. May 19, 1883

Provision Intended To Aid Farm Co-Ops

Ron Hutcheson Fort Worth Star-Telegram

If President Clinton was out to get Dallas businessman Harold C. Simmons on Monday, he may have missed the mark.

Simmons, a generous Republican donor, said he will not suffer any financial damage from Clinton’s veto of a tax break which, by some estimates, was worth $60 million to Simmons. Using the line-item veto for the first time, Clinton effectively blocked legislation that would let Simmons and other food processors defer capital gains taxes if they sold a processing facility to a farm cooperative.

Simmons’ diverse business interests include four sugar beet refineries in Idaho and Oregon that he had considered selling to the Snake River Sugar Cooperative, a group of sugar beet farmers. Instead of selling the facility outright, Simmons avoided taxes by entering into a joint venture with the sugar cooperative last year.

“The new legislation would not provide me … any additional deferral above what I have already received,” Simmons said in a prepared statement. “If this legislation is vetoed, my existing tax deferral and my financial position will not be affected.”

The fallout from Clinton’s veto illustrates the difficulties of sorting out winners from losers in the complex tangle of federal tax law. Rep. Charles Stenholm, D-Texas, who co-sponsored the vetoed tax break, said the belief Simmons was in line for a windfall doomed the proposal in the White House.

“It was totally misread, totally misinterpreted. The president’s advisers made a mistake,” Stenholm said. “There is no Harold Simmons story there.”

Stenholm, who said he talked to Clinton about the provision in a Sunday night telephone call, said the measure was intended to help farmers.

In theory, the tax change would shift power away from huge agribusinesses by giving small farmers a bigger stake in moving crops from fields to store shelves. Food processors who sell processing facilities to co-ops could defer capital gains taxes on the sale by reinvesting the profits.

Clinton endorsed the concept even as he vetoed the legislation.

“Because I strongly support family farmers, farm cooperatives and the acquisition of production facilities by co-ops, this was a very difficult decision for me,” the president said. Clinton concluded the tax change was overly broad and said he will work with Congress in rewriting the legislation.

“This provision would have allowed a very limited number of agribusinesses to avoid paying capital gains taxes, possibly forever,” Clinton said. “It could have benefited not only traditional farm co-ops but giant organizations which do not need and should not trigger the law’s benefits.”

Treasury Secretary Robert Rubin estimated the farm tax break would have cost the federal government about $98 million in lost revenue over the next five years. He said Simmons’ situation was not a major factor in Clinton’s decision. The congressional Joint Tax Committee estimated the tax benefit to Simmons at $60 million.

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

Former North Dakota Gov. George Sinner, a Democrat who serves as a spokesman for the Snake River co-op, said: “The veto hurts not only the 2,000 family farmers who make up the Snake River Sugar Cooperative, but it hurts as well the more than 2 million farmers across the country who could have been helped by this legislation.”