The $1.5 Trillion Business Tax Change Flying Under the Radar

Wall Street Journal reporter Richard Rubin writes about a GOP proposal to scrap interest deduction would have profound impact on debt-reliant businesses. That deduction impacts small and large businesses alike, effectively raising the cost of borrowing. Debt financing is often cheaper than equity financing because of this deduction.  Getting rid of the deduction could generate $1.5 trillion in revenue for the government, according to the Tax Foundation. This help pay for the proposed corporate tax rate reduction. The deduction may also be replaced by full and immediate deductions for capital investment.

Republicans are aiming to agree on a framework for tax policy by September and send a bill to President Donald Trump this year.

“The people that utilize debt, they utilize it because they don’t have the cash and they don’t have the access to equity,” said Robert Moskovitz, chief financial officer of Leaf Commercial Capital, which finances businesses’ purchases of items like copiers and telephone systems. “A dry cleaner in Des Moines, Iowa? Where is he going to get equity? He can’t do an IPO.”