Don’t Tax Groceries to Save the Farm

Commentary, Agriculture, Rolf Penner

A normally staid think tank has floated a truly foolish idea, that we should tax groceries to save the family farm, all in the name of a sustainable environment. Big Farms, Small Farms, a recent report which reads more like a manifesto than a policy paper, presents an ambitious vision that proposes to turn around Canada’s rural depopulation by squeezing revenue from the rest. Wrapping the notion in a mantle of conventional wisdom, the Agricultural Institute of Canada (AIC) then calls for an orgy of regulation that would spell disaster for rural Canada.

According to the paper’s authors, Hugh Maynard and Jacques Nault, the main motivations for the idea are the declining state of the environment, that current agricultural practices are not sustainable and that continuing the status quo means our natural resources will be depleted, with “major consequences.” Subjects such as soil erosion and water quality are discussed with the assumption that these “truths” are self-evident.

The apparent cause of the problem?

  • We have farms today that are too big and getting bigger,
  • There are too few of them,
  • Farmers are using too much technology which has made them too productive and too efficient,
  • Food is too cheap, and
  • We eat too much meat.
  • All of which supposedly leaves too large a “footprint” on the environment.

    Smaller farms, using less technology and not focused so much on the bottom line, are their answer. But this remedy creates another problem. It creates farms that are economically unsustainable.” The authors readily admit that, and offer as a solution a systematic redistribution of wealth from consumers to farmers. After all, the argument goes, Canadians eat the cheapest food in the world. They can therefore afford to pay a little bit more, especially for such a good cause, the environment.

    To implement their plan, the authors propose new bureaucracies, new departments and sweeping new regulations. A seven-percent tax on groceries would raise about $3.3 billions a year to cover the cost, says the report. Leaving aside the facts that dedicated taxes like fuel levies and EI premiums always seem to end up in general revenue, and that it costs between $1.25 and $1.50 for governments to give someone a dollar, that sum could never attain the report’s goals.

    It’s doubtful they could be accomplished even with unlimited funds. Canada’s supply-managed commodities like poultry and dairy, completely shielded from free-market “evil” of competition, receive returns on investment sometimes over 20%, thanks to overly generous cost-of-production formulas. Making these food items the most expensive in the world and plumping their revenue hasn’t stopped these farms from consolidating into larger ones. Artificially raising the price of the entire grocery basket to a similar point would not stop the trend to larger farms, merely result in reduced efficiencies.

    The economic problems facing Canadian farmers are not rooted in cheap food prices, but in our inability to produce it cheaply enough to remain competitive during cyclical market downturns. All thanks to decades of the kind of policies the AIC says we should expand. Past regulatory impositions and market interventions drive the fiscal dynamic that makes it difficult for both growers and the environment.

    Productivity, efficiency and technology are not the enemy of the environment, as the AIC report would have us believe, but rather its best friends. As a sample of the nonsense the authors peddle, consider this: “Modern agriculture – the ‘green revolution’ – is only 50 years young and when the application of its technologies and techniques is unconsidered and unchecked, the result has been soil erosion, chemical contamination, water depletion and environmental degradation.”

    Tell that to India, whose formerly starving people now export food. In fact, a mountain of scientific data shows that, despite a vast expansion of farm outputs, things like air, water and soil quality are actually improving. Numerous books covering the political spectrum, from right-wing Julian Simon’s The State of Humanity to left-wing Bjørn Lomborg’s The Skeptical Environmentalist, document it.

    The environment is getting better not worse, farmers are not interested in more handouts, and consumers are not interested in paying more taxes. Yes, the rural population is declining, but that can just as easily be viewed as a success story, not a tragedy. The standards for judging success are ample supply, efficient production and profitability, not the size of the farm unit or the number of farm-dwellers.

    Big Farms, Small Farms typifies post-Kyoto policy papers that follow the zeitgeist to a ‘T’. Amp up environmental concerns into a crisis and ignore contradictory facts. Present the usual solutions offered by central planning, like punishing taxes, stifling regulations and new bureaucracies. Mix in some old-fashioned class warfare, eco-mysticism and a touch of anti-Americanism, while asking people to ignore the bottom line. It’s truly a document fit for the crowd still opposed to the industrial revolution.

    That the AIC, a professional association of agronomists, should have embraced such a wide-ranging set of ultimately impractical dogmas is a surprise. These folks should stick to soil science, something they know well.