September 17, 2015
It did not come up much at last night’s debate, but there is a lot to like in the tax reform plans of Jeb Bush and Marco Rubio. They slash America’s corporate tax rate from the highest in the world to somewhere in the middle of the pack. They expand the Earned Income Tax Credit, a proven poverty-fighter, and lower individual rates to give working families a bigger paycheck. They may or may not bring the economy to four percent growth, but they are a good start.
Bush would eliminate the tax deductibility of corporate borrowing costs. This provision has sparked some controversy, even among pro-tax reform commentators. However, it would equalize the treatment of debt and equity, the two channels through which corporations can finance new investment, so it is a positive development.
Eliminating the corporate tax deductibility of interest is also a major component of the tax reform proposal of Senators Marco Rubio (R-FL) and Mike Lee (R-UT). Like Bush, Rubio and Lee would no longer allow businesses to deduct new debt, but would also remove the individual-level taxation of interest and capital gains entirely. As in Bush’s plan, this would create a balance between debt and equity, but boost the after-tax share of these financial instruments more substantially.
Read the full article at Economics 21: Bush and Rubio Pave the Way on Corporate Tax Reform