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Don’t leave business in the lurch in tax reform deal

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As leaders of U.S. companies playing a major role in the domestic economy, I join together with Andrew N. Liveris, chairman and CEO of The Dow Chemical Company, Douglas L. Peterson, president and CEO of S&P Global​,  ​Frank Bisignano, chairman and CEO of First Data, and David Zaslav, president and CEO of Discovery Communications​​, to urge Congress to pass comprehensive tax reform that includes less onerous and sudden restrictions on the deduction of interest expense, a critical component of normal U.S. business operations that promotes job growth, investment and U.S. competitiveness with global developed economies.​  

​​We are pleased with the progress that both the House and Senate have made in passing comprehensive tax reform packages. We support pro-growth tax reform that encourages innovation and investment in the U.S. economy. At the same time, we want to highlight a necessary improvement to help achieve our mutual goals of stimulating U.S. economic growth and job creation.  

Provisions in both the House and Senate bills severely limit the current ability of U.S. companies to deduct interest payments. Unlike the tax systems used by other major economies around the world, these new rules would unnecessarily impede growth for American employers that use debt as a capital infusion tool to drive growth and innovation. 

{mosads}Interest expense is a normal cost of doing business. Interest deductions have been ingrained in the U.S. tax code for roughly a century as a normal cost of business operations, and American companies have crafted and utilize business strategies that take this into account. Businesses of all sizes need to borrow for various reasons, like investing in innovation or expanding U.S. manufacturing capacity. Before accepting any debt, businesses carefully evaluate the cost-to-benefit ratio, with interest deductibility as a key factor. Changing rules on deductibility without regard for depreciation, pre-existing debt or transition periods will punish businesses that made investments in good faith, forcing them to accept a steep financial burden and unforeseen risks.


Our world-class capital markets currently provide a competitive differentiator over the markets in other countries for attracting businesses and investment. The current House and Senate limitations on interest deductibility will force businesses to borrow overseas, which could weaken U.S. credit markets and hinder U.S. job growth.

The negative impact that this new tax could have on U.S. economic growth and competitiveness can be easily remedied. We continue to believe that these provisions, particularly the proposed interest limitation that references domestic and global debt-to-equity ratios, should be eliminated. However, if not eliminated, the House-Senate Conference Committee should calculate the proposed 30 percent limitation based on Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA), and either exempt existing debt from the new limits on interest deductibility under both tests or, at the very least, phase in the new limitations for existing debt over a number of years. This would give companies the appropriate calculation method and the necessary time to restructure their existing financing arrangements to adjust to the new law.

Interest deductibility must and can remain a workable, functional and practical policy in the new tax code, at least with an appropriate calculation methodology and transition. Let’s work together to make the necessary improvements to ensure that tax reform gives the U.S. economy the opportunity to achieve its full growth potential.

Michael S. Dell is the chairman and CEO of Dell Technologies.

Tags Debt Dow Chemical Company House Senate Tax reform

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