State Lawmakers Blast House GOP Plan to Eliminate Interest Deduction

Rep. Bob Gibbs, R-Ohio, pounced on the House Republican proposal to eliminate the tax deduction for interest expenses, which is included in the conference's blueprint to overhaul the tax code, calling the concept "ludicrous." The House Agriculture Committee held a hearing Wednesday in which several members noted the need for an exception.The House Republican plan could result in higher taxes for many family farmers and other small businesses. The potential change would allow small businesses to deduct net interest expense, a measure the House GOP tax plan would eliminate in exchange for the ability to immediately write off equipment purchases."I can’t understand why anyone would come up with that," Gibbs said during a House Agriculture Committee hearing on tax reform. "They've obviously never run a business." Rep. Steve King, R-Iowa, also blasted the proposal.Agricultural operations are substantially debt-financed and incur a substantial amount of interest expenses each year, such as on equipment and land, said Patricia Wolff, senior director of congressional relations at the American Farm Bureau Federation. Losing the deduction would hurt farmers' and ranchers' cash flow and ability to make large purchases, and be "even worse for young and beginning farmers who have to buy land and equipment to get started," Wolff said.The Farm Bureau is one of the loudest voices pushing for an exception in an overhaul of the tax code. About 95% of farm sector debt in 2015 was held by banks, life insurance companies and government agencies, meaning that losing the interest deduction would harm their liquidity and make it difficult to purchase land and production inputs, the group said.As it stands, many small businesses do not need an overhaul of the tax code to be able to deduct the cost of machinery or software. Companies that buy less than $2 million worth of equipment in 2017 can fully deduct the first $500,000 under tax code Section 179.