Banks Push For Legislation To Lower Interest Rates

In the United States, 80 percent of banks have agriculture in their portfolio. And these banks are hoping to get a bill through Congress to give them some tax relief in order to lower costs for their rural customers.

Ed Elfmann, senior vice president of agriculture and rural banking policy for the American Bankers Association, says the “ACRE Act” would help lower lending costs for farmers, ranchers, and rural communities. It would do this by removing the taxation on income that’s earned from interest on agricultural real-estate loans, and for loans for rural residences in a population area of less than 2,500 people with a mortgage value of less than $750,000.

By removing this taxation, Elfmann says, banks would be able to lower their interest rates — which would then help lower costs for borrowers.

Elfmann explains that the change would benefit both new and existing farmers. He says access to credit can be much more difficult for new farmers and ranchers, and the “ACRE Act” would also specifically lower their costs to acquire land, which is the most-capital-intense portion of any farming operation. In addition, the “ACRE Act” would reduce the need for farmers and ranchers to find off-farm income.

“USDA is predicting a 27 percent downfall in farm income over the next year. We’re already feeling the effects of where the economy is going,” Elfmann says. “To us, you add the ACRE Act in and you start to lower those costs for farmers… that’s really big when you have a potential economic downturn coming.”

Wisconsin already has a similar program in place at the state level. If the ACRE Act is passed, it would give Wisconsin farmers and rural communities further benefits by applying to the federal tax income instead of just the state.

How Rural Wisconsin Benefits

According to data from the American Bankers Association:

• 64,793 farms would qualify for interest savings on loans secured by real estate
• 564,235 people live in a community that would qualify for mortgage interest savings
• Wisconsinites could rack up nearly $48.2 million in savings