More than 30 agriculture groups are expressing concerns about House Republicans' proposal to eliminate the deduction for interest expenses as part of corporate tax reform.
"As Congress works to enact comprehensive tax legislation, the positive reforms made should not be undermined by negative, unintended consequences as a result of eliminating the business interest deduction for agricultural entities," the groups wrote in a letter earlier this month to House Ways and Means Committee Chairman Kevin BradyKevin Patrick BradyHouse panel advances key portion of Democrats' .5T bill LIVE COVERAGE: Ways and Means to conclude work on .5T package LIVE COVERAGE: Tax hikes take center stage in Ways and Means markup MORE (R-Texas) and ranking member Richard Neal (D-Mass.).
The tax reform blueprint that House Republicans released last year proposed eliminating the interest deduction because it would instead allow businesses to immediately write off the full costs of their capital investments. The elimination of the interest deduction has been estimated to raise more than $1 trillion in revenue that can be used to offset cutting tax rates.
But some businesses and policymakers have been pushing to keep the deduction for businesses' interest costs. Treasury Secretary Steven Mnuchin has said that the administration's preference is to keep the deduction because of its importance for small- and medium-sized businesses.
The agriculture groups said in their letter that most family-owned farms rely heavily on credit, and that agricultural producers use debt financing to purchase land and equipment.
"Eliminating the interest deduction will place further financial stress on an already debt-burdened industry, and prevent producers from staying profitable in challenging economic times," they said.
The groups also said that debt financing will be particularly important for those seeking to get into the agriculture industry.
"As older producers exit the workforce, financing will be critically important for new and beginning farmers and ranchers looking to establish businesses," they said. "Eliminating interest deductions creates a significant barrier for the next generation."
Groups that signed the letter included the American Farm Bureau Federation, the Farm Credit Council and Western Growers.