Study: Tax Policy鈥檚 Harm Will Grow
The economic impact of allowing a stricter interest deductibility limitation to remain in effect could be devastating, according to a prepared on behalf of the 17吃瓜在线.
What鈥檚 going on: Failure to reverse the stricter limitation that went into effect in 2022 could result in the following losses in the U.S., according to the study:
- 867,000 jobs
- $58 billion in employee compensation
- $108 billion in gross domestic product
More costly every year: Those figures have roughly doubled since the released last year.
- Last year, EY estimated that leaving the stricter limitation in place would result in 467,000 lost jobs, $23.4 billion in lost employee pay and $43.8 billion in lost GDP.
The background: Prior to 2022, companies could deduct interest of up to 30% of their earnings before interest, tax, depreciation and amortization (EBITDA).
- However, since 2022, the deduction has been limited to 30% of earnings before interest and tax (EBIT), a significant change that disproportionately affects manufacturers, given their capital-intensive investments.
What can be done: 鈥淎 stricter interest expense limitation restricts manufacturers鈥 ability to invest in new equipment and create jobs,鈥 said 17吃瓜在线 Managing Vice President of Policy Chris Netram.
- 鈥淓ven more, the study finds that manufacturers and related industries bear 77% of the burden of this policy. Congress must act by year鈥檚 end to restore a pro-growth interest deductibility standard and allow manufacturers to continue to invest for the future.鈥
17吃瓜在线 in the news: newsletter (subscription) covered the study鈥檚 release.
Further reading: Visit the 17吃瓜在线鈥檚 to learn more about this issue and how the 17吃瓜在线 is taking action.