The Senate overwhelmingly approved a $275,000-per-farm cap on agriculture subsidies on Thursday, threatening the future of a Democratic farm bill.

"Capping farm payments will restore integrity to farm programs,” says Sen. Charles Grassley (R-Iowa). “Taxpayers can now have confidence that farm assistance will be targeted to those who need it the most. Today's action also sends a message that we will no longer tolerate large corporate farms reaping most of the benefits of federal farm payments.”

Grassley offered his payment limitations amendment to the farm bill with Sen. Byron Dorgan of N.D. The measure limits direct and counter-cyclical payments to $75,000 and establishes a combined payment limitation of $275,000 per year for a married couple or $225,000 per individual. The provision also closes loopholes that allow individuals to evade the limitations and receive multiple payments. The measure also would tighten rules that allow absentee landowners to qualify for subsidies and would cut off payments to anyone whose average income exceeds $2.5 million a year.

Both senators contend that big government payments are driving up land prices and allowing large operations to push smaller ones out of business.

Under existing rules, farms can receive unlimited subsidies for production of grain, cotton and soybeans, and growers can get $80,000 more under a separate program that provides fixed annual payments.

Under one program, a Florida real estate developer who controls 130,000 acres of farm and ranch land received at least $1.2 million in subsidies for the 2000 crop, according to Agriculture Department records. King Ranch Inc., a Houston-based company that owns 825,000 acres, got more than $638,000.

Southern Democrats trying to protect subsidies to large cotton and rice operations threatened to abandon the bill if the payment limit were approved. But a move to kill the cap failed 66-31, and the Senate then passed it on a voice vote. Sen. Zell Miller, D-Ga., says the subsidy cap was a 'poison pill.' Sen. Thad Cochran, R-Miss., warned the measure would be 'catastrophic for Southern farm interests.'

It’s estimated that the Grassley/Dorgan amendment would cut farm spending by $1.3 billion over 10 years, or $130 million annually, and use the money for food stamps, agricultural research and other programs.

In addition, the Grassley/Dorgan amendment would help producers who were not included in the 1996 farm bill receive loan deficiency payments. The amendment will provide a one-year extension of a provision in the Agricultural Risk Protection Act of 2000 that furnished LDP's to farmers not participating in the 1996 farm bill. The amendment also extends LDP eligibility to farmers who have lost beneficial interest in their commodity.

The Bush administration hasn’t taken a position on the measure, although officials have argued that existing programs unfairly benefit large farms and encourage the overproduction of crops that are already in surplus.

Associated Press and Sen. Charles Grassley’s press release