* Lawmakers in No. 1 grains province start tax debate
* Soy, corn growers say tax hike to erode profits
* Farmers have threatened to halt grains sales in protest
By Hugh Bronstein
BUENOS AIRES, May 31 (Reuters) - Lawmakers in Argentina’s biggest grains province started debating a bill o n T hursday to hike land taxes despite strike threats by farmers who say the reform would drive some growers out of business.
Cash-strapped Buenos Aires province is the country’s top producer of soybeans, corn and wheat. Multibillion-dollar grains shipments could be disrupted if farmers refuse to send their goods to port for a prolonged period.
Police surrounded the building to keep shouting and flag-waving farmers from interrupting debate on the tax increase, which Provincial Governor Daniel Scioli says is long overdue and will not hurt most farmers.
Scioli, seen on Wall Street as a possible market-friendly successor to President Cristina Fernandez in 2015, has struggled to round-up enough votes to start debate in the lower house.
The province was parched by drought in December and January. Extreme rains this month left some of those same fields under water, in a one-two punch that has cut into soy and corn yields.
“Those farmers who suffered drought and flooding won’t have to pay” the extra taxes, which “will only affect 38 percent of rural properties,” Scioli’s cabinet chief Alberto Perez told local television.
Scioli said rural land valuations in the province have not been adjusted since 1955. Strong global demand for Argentina’s grains and biodiesel shipments has pumped up the price of farmland in recent years.
Scioli says he wants to run for president if Fernandez’s allies do not try to change the constitution to allow her to seek a third term.
He wants to reduce his province’s fiscal deficit as the 2015 presidential election draw nearer. Analysts cite his need to bolster provincial coffers as a way of gaining independence from Fernandez, many of whose followers see Scioli as too right wing to carry on her progressive legacy.
The tax reform bill is expected to win approval in the lower house, clearing the way for a final vote in the Senate.
Hugo Biolcati, president of the Argentine Rural Society (SRA), one of four main farming groups that led months of anti-government tax protests in 2008 and 2009, warned that the reform would mean “a future of protest.”
Farmers halted grains sales last week in protest at the bill and they have threatened further protests if it becomes law. That could hit grains shipments and export taxes that account for about 10 percent of total state revenue.
Their lobbying kept the measure from being debated in the lower house until Thursday, in a surprise setback for Scioli.
Farm investment in Argentina lags that of its South American neighbors due to high uncertainty over policy.
Currency controls and import barriers have hurt confidence in Latin America’s No. 3 economy. Farmers complain about curbs that the government places on international corn and wheat shipments, meant to ensure ample domestic food supplies. (Reporting By Hugh Bronstein; Editing by David Gregorio)