94°F
weather icon Clear

Peter Guzman: Nevada businesses rely on interest deductibility for growth

As a business owner, I believe that one of the most important issues facing our nation today is tax reform.

Businesses of all sizes are struggling to compete in an increasingly competitive global marketplace due to an overly burdensome U.S. tax code compared to those of our international competitors.

Therefore, I’m glad to see that Congress is working on a robust tax reform package that they ambitiously hope to pass this year.

While I support long overdue tax reform, there is one provision within the House Republicans’ blueprint that concerns me—a proposal to limit the ability of businesses to deduct the interest they pay on debt from taxable income.

This may seem like an obscure topic, but it’s actually something most businesses of all sizes are intimately familiar with because interest deductibility is a key factor in running a modern business.

Here’s how it works: when a business owner needs constant cash flow to grow, hire more employees, or simply run their business on a day-to-day basis, they borrow money from lenders.

This is referred to as “debt financing,” and the interest on these borrowed funds can be deducted from federal taxes.

In turn, this encourages companies to take on the kind of measured risk that’s needed to create jobs and promote economic growth.

Despite the critics’ arguments, interest deductibility is not some kind of “tax loophole” for big businesses. An incredible 75 percent of start-ups rely on debt financing (and essentially, the interest deduction) to get off the ground.

Furthermore, 80 percent of all small businesses rely on interest deductibility to maintain daily operations. More than 50 million people are employed by small businesses across the country that rely on debt financing.

Limiting interest deductibility translates into an unnecessary tax increase on American businesses. While I am strongly in favor of reforming our overly-complicated tax code to promote greater economic growth and prosperity, I believe limiting the interest deduction will have the opposite effect.

Fortunately, the architect of the House blueprint, Ways and Means Committee Chairman Kevin Brady, R-Texas, is beginning to understand the negative impact his proposal to limit the interest deduction would have on our nation’s economy.

He recently expressed support for “carve-outs,” or exempting certain industries from his interest deductibility proposal within his tax reform plan.

While this is a step in the right direction, it is also indicative of bad public policy when only certain industries are shielded from the policy’s negative impact.

We desperately need to reform our complicated tax code, but in a way that will ensure America’s business community can create jobs, strengthen our economy, and compete in the 21st Century global economy.

Peter Guzman is president of the Las Vegas Latin Chamber of Commerce.

Don't miss the big stories. Like us on Facebook.
THE LATEST
TIM BURKE: Nevada Democrats force November mail-in ballot

The act of physically going to a polling location and casting my vote in-person has always given me a feeling of satisfaction that I am participating in the election process.

THOMAS KNAPP: Afghanistan Bounties: Pot, Meet Kettle (and Turn Off the Stove!)

“These are anarchists, these are not protesters,” President Donald Trump said on July 20th, defending his decision to unleash Department of Homeland Security hooligans on anti-police-violence demonstrators in Portland. Anarchist-bashing — referring to “radical-left anarchists” in Minneapolis, “ugly anarchists” in Seattle, etc. — has become a consistent Trump campaign theme since May.

CHUCK BAKER: Land, Land, but not an inch to spare

“Don’t Fence Me In” was a popular song in the 1940s. Some might say it could be today’s theme song for Nellis AFB. Between all the land held in Nevada by the local air base and the Bureau of Land Management, it appears that control over boundaries and borders will be with Silver State entities for quite some time. And not just in the south.

TIM BURKE: First Amendment protects free speech, not violence

In the rural counties of Nevada, it is not uncommon to have residents assemble and express their conservative viewpoints. Here in Pahrump, during patriotic holidays like the Fourth of July, you might find someone standing along the main roadways waving an American flag to show their support for this country. It is also common to see American flags attached to residents’ cars and trucks around town. These residents are exercising their First Amendment rights.