To Have Tax Reform And Infrastructure Spending Together, Interest Deductibility Must Be Maintained.

With the Affordable Care Act repeal and replace effort tabled for now, the White House and Congress say they are shifting focus to their next big project: tax reform.

However, according to an Axios article this week, this might not be all they are considering. Rumor has it that plans for a massive infrastructure spending package will be moved up – along with tax reform. Unfortunately, one key provision in the tax reform proposal will stand in their way – eliminating Interest Deductibility.

The benefits of investing in our nation’s infrastructure are clear: upgrading our bridges and roads creates jobs and encourages economic growth. Congress, however, has created a challenge to successful infrastructure spending: the plan in the House GOP’s Blueprint to eliminate ID.

The Administration’s goal of  $1 trillion in infrastructure investment mostly relies on private companies investing their own capital into these projects. ID is central to the business practices of construction and utility firms who rely on debt financing to make necessary investments in the equipment and supplies, as well as expand their operations.

For utilities in particular, interest expenses can equal up to 12 percent of their revenue – a loss that could not be offset easily, even with a reduction in the corporate tax rate. Instead, companies would likely have to cut back on future investments – therefore committing less capital to building new infrastructure.

By eliminating ID, private sector participation in any infrastructure plan will be significantly hampered, resulting in far fewer completed projects and a greater burden on American taxpayers. Dollars not invested by private companies must be covered by the government, which means higher tolls and taxes to pay for it.

It is clear that the renovation of American infrastructure is long overdue, both for safety reasons and for the boost to the economy. The BUILD Coalition believes this spending will be incredibly positive for America – but in order to reap the maximum economic benefits, Congress must maintain full interest deductibility in the tax code.