CASE Op-ed: Limiting Interest Payment Deduction Will Only Hurt Consumers
October 6, 2017
If you thought Congress’s performance over the failed attempt to repeal Obamacare made Hamlet look decisive by comparison, you’re not alone. Unfortunately, as they now move on to the issue of tax reform, lawmakers in Washington are channeling yet another Shakespearian character, this time the oafish Polonius, whose financial advice to his son boiled down to, “neither a borrower nor lender be.” Clearly, Polonius never had to build a business or meet a payroll.
Borrowing, seen from the lending side of the coin, goes by the name of investment, which of course is the critical ingredient that grows our economy and allows businesses to expand, innovate and hire more people. Yet for some unfathomable reason, Congress now has an idea on the table as part of the current tax reform proposal to limit the deductibility of interest from business debt financing, a magnificently oafish proposal that will discourage exactly the kind of borrowing and investing needed to spur our economy.
Debt financing plays a critical role in the starting up and expansion of a vast majority of U.S. businesses. Without the ability to deduct the cost of interest on debt, most businesses could not afford to borrow the money needed to fund and expand operations without passing significant costs on to consumers, who may not be willing or able to pay the higher cost.