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 With a cumbersome, outdated, and bloated tax code, reform has the potential to provide a significant boost to the U.S. economy.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
Interest Deductibility: A Building Block for Growth from BUILD Coalition on Vimeo. As Congress begins to ramp up its efforts to reform the tax code, it is important that policymakers understand that any call to limit interest deductibility should be a non-starter in the discussion. Watch the video above to learn more about how important
Businesses in all sectors of the economy use debt to grow (see the benefits of debt to companies here). From professional services, retail trade, and manufacturing to construction, wholesale trade, and financial services, all industries use debt financing to build a new factory, invest in new technology, manage payroll, and finance many other business activities.
In the political discussion surrounding interest deductibility, some have attempted to cast all debt as a bad thing. They wish to insert this narrative in order to portray a limit on interest deductibility as a basis of tax reform. However, lost in the rhetoric and political discussion are many benefits debt provides businesses. Debt provides
Interest deductibility allows businesses to deduct interest on debt from their taxable income. As a cost to doing business, interest has been 100 percent deductible since 1913. It is a core component of the tax code. Below are four representative case examples showing why businesses could use debt and how it is critical to economic
The BUILD Coalition welcomes the promise of tax reform, but a new tax targeting interest is simply not reform. True reform works to improve the U.S. economy and create jobs rather than raise costs on businesses. Interest deductibility is critical to the U.S. economy. Below are key facts about interest deductibility. WHAT IS INTEREST DEDUCTIBILITY?