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The $1.5 Trillion Business Tax Change That Could Alter Financial History

'Tweak' would affect companies that are reliant on debt

Finance By

For debt-reliant businesses, a change to the business tax code proposed by Republican lawmakers, could be a major wakeup call if passed.

As the Wall Street Journal notes, the proposed change would be to a building-block of modern finance: The business deduction a company gets for the net interest it pays on debt.

Per the Tax Foundation, nixing the business reduction could generate $1.5 trillion in revenue for the government over the next 10 years.

As Rep. Kevin Brady, a Republican from Texas and the plan’s author said at a Journal-sponsored conference in June: “What we’re proposing is to take the tax preference from the source of funds—borrowing—and take that preference to the use of funds—business investment and buildings, equipment, software, technology.”

Most directly affected businesses would be those that rely heavily on debt—or those that “don’t have the cash … [or] access to equity,” Robert Moskovitz, chief financial officer of Leaf Commercial Capital, noted to the Journal.

And it’s unclear whether the Trump administration would be for a tax code change as drastic as this one. Treasury Secretary Steven Mnuchin has lobbied for keeping the existing debt reduction.

The GOP’s goal is to sure up tax policy by September and present a bill later this year.

Read full story at Wall Street Journal