Jerry Bowyer: A Necessary Fix On Tax Reform
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December 12, 2017
The Senate version of tax reform has a hidden problem which needs to be addressed. It would greatly increase the tax burden on companies which are in debt. When a company expands operations, by say, building a factory, they usually borrow money to do it.
The tax code has always allowed business to take the cost of that borrowing into account when they calculate their profit for the sensible reason that it is a cost of doing business. Tax reform is cutting that back, and the Senate version is cutting it back severely, especially for companies that own a lot of heavy equipment such as miners and manufacturers, exactly the type of companies that we're trying to revive as part of the Trump growth agenda.
If we get this wrong, during the next downturn, we may well see an epidemic of high growth and heavy equipment companies driven into bankruptcy by their inability to pay their old debt and their new taxes on it at the same time.
The tax code has always allowed business to take the cost of that borrowing into account when they calculate their profit for the sensible reason that it is a cost of doing business. Tax reform is cutting that back, and the Senate version is cutting it back severely, especially for companies that own a lot of heavy equipment such as miners and manufacturers, exactly the type of companies that we're trying to revive as part of the Trump growth agenda.
If we get this wrong, during the next downturn, we may well see an epidemic of high growth and heavy equipment companies driven into bankruptcy by their inability to pay their old debt and their new taxes on it at the same time.
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