BUILD Coalition Statement On Tax Day

On tax day, BUILD Coalition spokesperson Russ Grote released the following statement:

“Today, American businesses are yet again finishing a complex and burdensome process to pay their taxes. As policymakers continue to debate the future of our tax code, the BUILD Coalition reiterates its continued support for the goals of tax reform. Reform has the potential to boost long-run economic growth, add jobs, and support businesses as they innovate and grow. Central to meeting these goals is maintaining full interest deductibility, an ordinary and necessary business expense used by businesses of all sizes and sectors. Going back almost 100 years, this core component of the tax code is essential to U.S. economic growth and should be fully maintained as part of reform.”

Limiting Interest Deductibility To “Pay For” Tax Reform Reduces Long-Run Economic Growth According To EY Analysis. “This analysis finds that, on net, a revenue-neutral reduction in the corporate income tax rate financed by an across-the-board limitation on corporate interest expenses would adversely affect the US economy in the long-run.” (EY, “Macroeconomic analysis of a revenue-neutral reduction in the corporate income tax rate financed by an across-the-board limitation on corporate interest expenses,” BUILD, 7/13)

Specific findings include:

• GDP falls by an estimated 0.2% in the long-run or $33.6 billion in today’s economy
• Investment falls by an estimated 0.3%, or $6 billion in today’s economy; and,
• Economic welfare, measured by the value of household’s consumption and leisure, falls by an estimated 0.4%.

The Negative Impact Of Higher Capital Costs Due To Limits On Deductibility Of Interest Outweigh The Benefits Of A Lower Corporate Income Tax Rate. “The negative impact of the limitation on corporate interest expenses more than offsets the positive impact of the reduction in the CIT rate. The increase in the cost of investment from the limitation on corporate interest expenses more than offsets the combined benefit of the reduction in the CIT rate and the improved economic efficiency from the more even tax treatment by source of financing.” (EY, “Macroeconomic analysis of a revenue-neutral reduction in the corporate income tax rate financed by an across-the-board limitation on corporate interest expenses,” BUILD, 7/13)