Company Executives Identify The Next Big Tax Reform Fight: Interest Deductibility

In a study conducted by the BUILD Coalition last week, we analyzed all public company earnings call transcripts since House Republicans released their Tax Reform Blueprint in June of 2016. The goal was to gain insight into how businesses are thinking about the potential impact of tax reform — especially the proposal to eliminate interest deductibility (ID). We found close to 80 companies mentioned interest deductibility, which was topped only by discussions of the border adjustment tax.

Key findings from our analysis include:

Out of the 471 earnings transcripts that discussed tax reform, BAT was the most discussed component of the Blueprint (24.4%).
However, coming in at a close second was interest deductibility (16.6%), which was more frequently discussed than repatriation (14.9%).
Corporate management teams from a broad array of industries including utility companies, telecoms, hospitality, real estate, and private equity are concerned about the harmful impact of eliminating ID. This underscores that this issue will be an important part of the tax reform conversation in the coming weeks.

Removing the deduction of interest expense would harm businesses of all sizes and across all sectors by multiplying the cost of borrowing. ID encourages companies to make long-term investments and support their operations during business cycles. The provision also helps businesses to grow and compete globally, which is why U.S. policymakers should maintain full interest deductibility to ensure tax reform efforts are supportive of economic growth.