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DAVID KRUSE

By Staff | Jan 1, 2010

The U.S. Senate has been tied in knots over the health care bill. While they finally put together a bill that 60 Senators could agree to, they have failed at getting other critical legislation finished.

The $1/gallon credit for biodiesel expires Dec. 31. The House passed an extension, but the Senate has not and it’s looking like it isn’t going to. They claim to have the support to pass the credit extension for biodiesel, but they have diddled and dawdled with Senate relations deteriorating so much they can’t agree what time of day it is, forget what they are there for.

Democrats wanted to attach the biofuel’s credit extension to the defense appropriations bill, but Iowa Senator Harkin said, “We could not find one Republican (who) would support it, not one.” A reporter asked, “Not even Senator Grassley?” Harkin replied, “No one, we had no one. I repeat we had not one Republican who would support it if we had things on it like the biodiesel tax credit. So, we’re going to have to look for something else.”

Harkin called it a Republican scorched earth strategy “of using maximum floor time for the health care bill and other legislative bills indicating it’s gotten to the point now where everything has to be filibustered, everything.”

Without the credit the U.S. biodiesel industry will begin to shut down plants after the first of the year. The Senate will eventually pass the extension, but not in time now to avoid disrupting the biodiesel industry who would not be able to produce until Congress acts in full. Grassley’s office claims Senate Majority leader, Harry Reid wants to include the extension in an estate tax bill. With the ongoing impasse over estate tax reform, that’s not going to happen in any biodiesel industry-friendly, timely manner either.

Feedstuff’s wrote, “Last week, the National Biodiesel Board released a study conducted by economic analyst, John M. Urbanchuk examining the economic impact of the biodiesel industry and the negative consequences of allowing the federal biodiesel tax credit to lapse.

“The study found that ‘without the tax credit, the price of biodiesel would be insufficient to provide a positive return over variable costs and the biodiesel industry could be expected to collapse.'”

That’s as serious as it can get. It will have a significant consequence to soybean growers as demand for soy oil is lost. Ironically, the President is focused on green energy in Copenhagen, while Congress is allowing a green industry to fail because of its inability to work together.

I blame it on partisanship and a dysfunctional Congress. Only the partisans care about who wins these arguments. We know who loses.

Republicans think they pulled a fast one over on Democrats by refusing to compromise, allowing the estate tax to expire for next year. The problem is that nobody will know what the estate tax will really be as the expiration written into existing law lasts just one year and the tax comes back in 2011 with a vengeance at a high 55 percent rate and low $1 million exemption.

To top that off, heirs lose “cost basis” exemptions next year so would get hit with big capital gains taxes.

The WSJ wrote “Estate tax lawyers and planners are shocked and livid. We never dreamed Congress would be this irresponsible. It is the stupidest policy imaginable. People will die and executors need to move quickly. But no one knows what the law will be.”

This is exactly what most people hate about Congress. Republicans and Democrats play their political games and the people’s business doesn’t get done. Registering as a Republican or Democrat encourages and enables the partisan war. Congress is never going to eliminate the death tax so it is a matter of eventually compromising on a tax rate and exemption.

This is another casualty of being immersed in the health care debate. Republicans want to create estate tax chaos in order to increase sentiment to eliminate it. Chaos is always a poor solution to anything.

A $5 million exclusion and estate tax rate of 35 percent would be as a good compromise as they are going to get. The Republicans could have passed estate tax reform when in control of Congress, but greedily hung on for full abolishment, lost control of Congress so are now playing defense against Democrats, all because of a refusal to compromise. That’s the story of the U.S. Congress today.

The total fixation on health care legislation is consuming Congressional productivity, which has never been noteworthy anyway. That’s bad in the cases of their failure to extend the biodiesel tax credit or addressing the expiring estate tax, both of which will bring on chaos to affected industries and estates.

Senators Grassley and Baucus claim they will take up the biodiesel tax issue early next year, but good intentions don’t get very far in the U.S. Senate.

David Kruse is president of CommStock Investments Inc., author and producer of The CommStock Report, an ag commentary and market analysis available daily by radio and by subscription on DTN/FarmDayta and the Internet.

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