As a legislator here in Georgia who chairs a committee dedicated to fostering greater economic development and growth, I am completely behind the concept of finally reforming our overly complicated and burdensome tax code. This effort is long overdue in Washington, and if done the right way, tax reform could result in strong economic growth for decades to come.
My concern, however, is that Congress is going to lose sight of the end goal of stronger economic growth by imposing new taxes on our job creators. One of the proposals under consideration by Congress’s "Big 6" tax reform team is the limitation on the business interest deduction — essentially a tax increase on all of our nation’s businesses, including our farmers.
Often referred to as interest deductibility, this critical provision is a normal cost of doing business that has been a part of the American tax code for the past century.
The deduction stems from the long-standing accounting practice of businesses borrowing money and deducting interest accrued on that debt, and it is used by businesses of all industries and sizes throughout the economy. Indeed, the use of the deduction spans from start-ups that borrow needed capital to get their operations off the ground to fully established businesses that take on loans during periods of economic uncertainty or when adjusting to seasonal changes that sometimes require hiring additional employees.
Interest deductibility could be limited — or even eliminated altogether — by the time a final tax reform package comes to fruition. Doing so would endanger American businesses’ ability to compete in an increasingly global economy.
The deduction for business interest expenses on responsible borrowing has been a hallmark for America’s economic growth and prosperity, as it has helped foster innovation, create jobs and increase the efficiency of owning and operating a business. In fact, right here in Georgia we’ve seen tremendous growth in recent years, particularly in the technology sector, that I believe can be attributed to the use of interest deductibility.
The progress we’ve seen in Georgia and throughout the country following the end of the recession could come to a halt if Congress increases the cost of doing business by limiting or eliminating interest deductibility. This new tax on business investment would have the predictable effect of reducing the number of jobs created and restricting future economic growth. How is this considered to be "pro-growth tax reform" from a Republican Congress? If memory serves me correctly, Republicans — the majority in the House, Senate and White House — have historically opposed tax increases given the proven negative impact they have on our nation’s economy.
Without question, we are long overdue for a major overhaul of the U.S. tax code, but the last thing Congress should be considering during the tax reform debate is another tax increase on top of those we’ve already endured over the last eight years. If Washington wants to spur more economic growth for decades to come, then lawmakers need to stop considering policies that would punish the job creators, which are the backbone of this nation’s economy, by imposing more taxes on them.