November 4, 2014

Beef Tax, Take Two

Robert Martin

Robert Martin

Director of Food System Policy

Center for a Livable Future

Exhibit by  Oregon Cattle & Horse Raisers Association, circa 1940 / OSU

Exhibit sponsored by Oregon Cattle and Horse Raisers Association, circa 1940 / OSU

My blogpost last week, “Taxation Without Representation, Beef Industry Style,” highlighting the problems of the federally sanctioned beef tax (commonly referred to as the “beef checkoff”) drew an analysis from Kendal Frazier, the chief operating officer at the National Cattlemen’s Beef Association (NCBA). (See the comments section for his response.) He may not remember me, but I have interacted with Kendal periodically over the years when he was an agriculture reporter in Kansas, as well as working public relations for the Kansas Livestock Association, and I worked first at the Kansas Farmers Union and then as communications director for then Kansas Congressman Dan Glickman.

The theme running through his comments was that “while we are all entitled to our own opinions, we are not entitled to our own facts.” The origin of that phrase goes back to former Democratic Senator Daniel Moynihan of New York and I would bet it is the only time an NCBA person has relied on making an argument quoting a Democratic Senator.

There are some points raised that deserve a response and clarification.

NCBA’s statement that “nothing is ruled unconstitutional until the Supreme Court speaks, and Supreme Court found it constitutional.” This point seems like quibbling to me. What I said was that the “this dollar-per-head tax is a government-levied tax, and while it was once ruled unconstitutional, the Supreme Court ruled that it represented ‘government sponsored speech’ cementing it as government-sanctioned.”

The fact is, the 8th Circuit Court ruled it unconstitutional on July 8, 2004, and the Supreme Court reversed that decision on May 23, 2005, just as I indicated generally. The only reason I even brought up the court cases is because the Supreme Court declared the checkoff as “government sanctioned speech” to justify the collection of the tax. Usually, the Big Beef boys challenge calling the checkoff a tax, and I wanted everyone to understand that the Supreme Court declared it a tax.

Another of Kendal’s complaints was that I said the Cattlemen’s Beef Promotion and Research Board (CBB) “shares collected funds” with the State Beef Councils. I understand that the state boards collect the beef tax and sends half to the CBB. I did not mean to imply that the arrangement was the opposite. Seems like it makes little difference, but I did want to clarify my point.

The NCBA also complained about my comment that “the NCBA takes the beef check off dollars and contracts with advertising agencies to develop the promotion program.” They claimed that joint committees “provide direction for the programs, and advertising agencies help implement this guidance and direction.” That is a distinction without a difference. You can’t tell me that the joint NCBA committees write the scripts, develop the artwork, produce the materials, recruit the voice talents, tape the commercials, and buy the television, radio and newspaper ads for these promotional efforts.

I will have to take NCBA’s word for the number of members it has. I stated they have 26,000 members today, down from 40,000 in 1994. NCBA says they have 30,020 members. I took the membership information from a February 2014 article in The Washington Monthly magazine. All right, so they have 4,000 more members than I cited. That number is still a 25 percent decline from 1994. What is more interesting is that NCBA states it has 140,000 affiliates, more than four-and-a-half times the producer membership.

There seems to be a bit of confusion about whether or not audits have approved of actions by the NCBA. An audit in 2010 by the CBB, with the help of an independent accounting firm, showed, in part, that “NCBA charges to the check off in these five areas (overhead costs, employee time reporting as a basis for the allocation of salaries and benefits to the check off, travel expenses, costs of NCBA’s Federation of State Beef Councils division, and subcontractor selection procedures) showed expenses improperly charged or insufficiently documented.” Included in the problem areas were travel expenses for the spouses of staff and volunteer leadership, consulting expenses, travel for an NCBA insurance program and NCBA employee time for non-checkoff revenue development programs. In 2010, the NCBA returned $216,944 to the government “after a spot audit revealed that it had misappropriated check off funds.” Office of the Inspector General has not shown abuses but OIG has also recommended that USDA’s Agricultural Marketing Service strengthen oversight over checkoff funds and their use.

NCBA took an exception to my statement that “in the late 1970s and early 1980s, promoters of the tax attempted to make it happen through producer referendums. The problem is, producers DIDN’T vote for it. In fact, Congress ended up establishing the beef tax and setting up the structure.” NCBA said I was wrong because producers did vote for the program 20 months AFTER USDA set it up after being mandated by Congressional legislation. They said the fact that I stated it correctly…producers rejected it, Congress established it….is immaterial since producers approved it much later. (And they were wrong, the program had not been operating for 20 months, it had been operating for 22 months, according to the USDA.)

It is a typical tactic that when one cannot address the main arguments that one responds with a flurry of comments to distract people from focusing on the main argument. To me, that’s what the NCBA is doing.

In my original piece, I said that the NCBA has supported issues and taken action that are opposed by independent cattle producers. Some of those issues include:

  • Fighting against country-of-origin labeling
  • Opposing mandatory price reporting
  • Opposing class action law suit by independent producers on captive supply issue
  • Supporting early re-introduction of cattle from disease-affected countries
  • Opposing banning packer ownership of cattle until 2 weeks before slaughter
  • Opposing increased enforcement of anti-trust laws

Not one of those issues was addressed in NCBA’s comment. The former head of USDA’s Grain Inspection, Packers and Stockyards Administration (GIPSA) from 2009 to 2012 and attorney Dudley Butler has said, “This Administration is well aware that the NCBA has misappropriated producer contributions. The Administration is also aware that the NCBA’s control over the beef check off program has helped it and the meat packers defeat major policy reforms sought by independent producers.” Butler suggested that the beef tax stop being collected.

The NCBA did not state why they believe that USDA Secretary Tom Vilsack is so frustrated with the current structure of the CBB and NCBA relationship and lack of serious reform proposals that he has threatened to set up a new beef check off program with more direct oversight by USDA. Clearly, a very simple, basic reform would be what I originally suggested: make the checkoff voluntary at the time of sale and see how producers continue paying the beef tax.

As far as all the quibbling about this and that from the NCBA and my original blogpost, I would paraphrase Shakespeare. Methinks the gentleman doth protest too much.

Image: Oregon State University Special Collections & Archives Research Center.

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