A March 1 POLITICO piece entitled “The Powerful Financial Reform Within The House GOP Tax Plan,” incorrectly describes interest deductibility (ID) as a tax provision that makes the economy riskier by encouraging debt financing. This is a simplistic view that mischaracterizes a fundamental feature of our economic system—one that has helped to drive growth in..
This week, the Association for Corporate Growth (ACG) held its 2017 Middle-Market Public Policy Summit, where lawmakers and business leaders met to discuss the new political landscape and how public policy can promote the growth of the middle market. One important topic that came up was interest deductibility (ID). The middle market covers roughly 200,000..
In its February 2 piece entitled “What If Interest Expenses Were No Longer Tax-Deductible?“, The Economist incorrectly describes interest deductibility (ID) as a tax break that makes the economy riskier by encouraging debt financing. This is a simplistic view that mischaracterizes a fundamental feature of our economic system—one that has helped to drive growth in the..
Virtually every company in America relies on credit to finance investments–be it to upgrade equipment, open new facilities, meet payroll, or hire more talent. The ability to deduct the interest expense related to the funding of these activities has allowed businesses across all sectors of the U.S. economy to grow and remain competitive for close..
By Mac O’Brien, Spokesperson, BUILD Coalition In his December 20 piece entitled “The Tax Reform No One Is Discussing,” author Scott MacDonald employs a series of dubious assumptions and misleading examples in recommending the elimination of interest deductibility from the tax code. The truth is that such a reform would be anti-growth and harmful to..
Dr. Rebel Cole, Professor of Finance at DePaul University’s Driehaus College of Business, has issued the following statement in response to an article in The Economist entitled “The Great Distortion:” The Economist‘s piece misses the key point that allowing firms to deduct interest payments enables firms to raise capital needed for new investments. Limiting interest..
The following examples are drawn from Dr. Rebel Cole’s “Why Businesses Use Debt – And How Businesses Benefit From Debt.” Private business Chez José is a small restaurant owned by its proprietor—José Smith. Last week, José learned that he needs a new roof on his building, and that this will cost him $10,000. Unfortunately, José..
View pdf here. The stated goals of tax reform are to boost the U.S. economy, increase investment, create more jobs, and foster innovation. With a cumbersome, outdated, and bloated tax code, reform has the potential to provide a significant boost to the U.S. economy. However, focusing solely on lowering rates may lead to harmful policy outcomes. This primer..
1. What is interest deductibility? Interest deductibility refers to the ability of businesses to deduct the interest paid on debt from their taxable income. This 100-year old component of the tax code allows businesses to deduct interest payments from loans or other forms of debt as a cost of doing business. 2. What kinds of..
Businesses use credit to grow, manage payroll, and make job-creating investments. It’s fundamental to business. However, proponents of a new tax targeting interest on debt have often argued that interest deductibility distorts incentives, which might lead to too much credit in the economy. While this new tax will raise costs for businesses onnew investments, correcting..