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 debt financing is to nearly all businesses – large and small – and how any measure that increases the costs associated with this will be detrimental to American business and economic growth.
“The nation’s tax laws certainly need to be revamped to unleash entrepreneurship, investment, capital formation, and job creation — but limiting the ability of businesses to deduct interest is not the way to go,” said Jeffrey D. DeBoer, CEO of The Real Estate Roundtable.
As shown in the BUILD Coalition’s most recent study by EY, limiting interest deductibility to finance lower rates reduces economic growth.
“Entrepreneurship is at the heart of a robust U.S. economy, and interest deductibility is key to ensuring these young businesses have a chance to grow and create jobs,” said Karen Kerrigan, President & CEO, Small Business & Entrepreneurship Council. “Tax reform is indeed necessary, but proposals that stifle growth and the entrepreneurial spirit will undermine the purpose of this important effort.”
“Virtually all businesses, and especially small businesses, rely on credit as a means of expanding operations, covering payroll, creating jobs, and serving the American people, said Beth Solomon, President and CEO of the National Association of Development Companies. “The video that the BUILD Coalition released today provides a visual explanation of the critical role that debt financing plays in everyday business activities. Increasing the cost of debt for businesses would reduce their ability to contribute to the U.S. economy in a positive way.”
“From the coffee shop you visit on your commute, to the company where you work, to your hotel on vacation,” the video explains how the majority of American businesses utilize credit to operate and grow their business. It offers a step-by-step explanation of how debt financing helps companies to invest, create jobs, and expand their services to reach more customers, and how it allows entrepreneurs to create new ventures and products. The video also provides hypothetical examples that outline how limiting interest deductibility would cause, “unnecessary harm to the countless businesses of all sizes that depend on debt financing to fund their operations.”
The number one goal of tax reform is boosting economic growth and, by increasing the cost of credit, limiting interest deductibility undermines the very goal reformers are working toward.