Short Paper 2

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School

Southern New Hampshire University *

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CULTURE

Subject

Law

Date

Jan 9, 2024

Type

docx

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Uploaded by MateHawk15066

The house tax plan may try to shift the deductibility of interest and expenditures of capital assets. This could change how companies account for debt. Interest would not be counted as an expense for tax purposes. When a company files their tax return, interest would normal help reduce the company’s taxable profit, which allows them to pay less in taxes. If this is removed, then many businesses would be affected. According to tax code 26(A)(1)(B)(VI) (163), there is a limitation on the amount of business interest that is allowed for a certain taxable year. The amount of allowed deduction is limited to the sum of the business interest income of the tax payer for the current taxable year, 30% of the adjusted taxable income of the taxpayer for the current taxable year, plus the floor plan financing interest of the taxpayer for the current taxable year. The amount of the deduction can not be less than zero. This is something that business look to when the takeout loans and know that they can deduct the interest on their end of the year taxes. There are people who are for this change and some that are against this change. The supporters of the change say that is would remove skewed incentives, stoke entrepreneurship and even make the economy less prone to recessions over the long-term plan. The opponents of the tax bill say that this change would create a drop-in investment and that it would be harder for businesses, especially small business, the ability to raise money they need for fund their business or the ability to expand their business. There are people who argue that borrowing and getting a tax break for this creates an unfair advantage. This allows some companies to take advantage of this and borrow more money than they can pay back in a timely manner and creates debt. If many companies did this, then the situation would happen again when they would be looking for a bailout from the government because they can not repay their debt. This in the end would create another recession and this is not something the company would want to do. This would

hurt the consumer more then the businesses. It is being argued that this change would create a more even playing field for companies because the amount of your tax savings would be connected to the amount of your investment spending and not how much debt you are carrying. I agree that we should give this a try. We want to encourage companies to borrow money but to make sure that it is being invested correctly. We don’t want them to continue to borrow money just so they can get a tax break.

References https://www.law.cornell.edu/uscode/text/26/163 https://www.nytimes.com/2017/04/05/business/dealbook/congress-tax-deductions-corporate- trump.html?mwrsm=Email

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