As The Focus Returns To Infrastructure This Week, It’s Worth Revisiting Interest Deductibility’s Role In Spurring Investment

This week, President Trump is engaging with executives, mayors, and community leaders to discuss America’s much-needed investment in roads, railways, waterways, and other major infrastructure projects.

With over $4.6 trillion needed by 2022 just to get our infrastructure to a “B Grade,” President Trump’s proposed $1 trillion plan is an important first step. As we explore ways to rebuild America’s infrastructure, it is worth noting the key role interest deductibility in the tax code will play in encouraging private sector participation in any infrastructure plan.

Indeed, the Administration has signaled that it plans to rely heavily on private capital — with 80 percent of the funding for the Administration’s plan coming from the private sector. One of the surest ways to ensure private sector investment is available, with or without incentives, is to maintain interest deductibility.

Without the option to deduct interest payments on loans, companies will face higher borrowing costs, impeding their ability to invest and support the overhaul envisioned by the Administration.

What’s worse, aside from creating an additional burden on companies that could result in fewer infrastructure projects, eliminating interest deductibility may also directly harm consumers. Utility companies, for instance, have warned that without the ability to deduct interest expenses, it will become more difficult to provide American homes and businesses with reliable and affordable electricity.

These concerns have been voiced repeatedly by dozens of companies and directly to members of Congress. During a recent senate hearing, a Nokia executive explained it in simple terms: “The loss of interest deductibility means less dollars, billions of them, for broadband infrastructure deployment.”

In light of these negative consequences from eliminating interest deductibility, combined with the urgent need to upgrade America’s infrastructure, it is clear that maintaining interest deductibility will be vital to the success of any plan moving forward.