The U.S. is entering a new period of prosperity under President Trump. Thanks to Republican policies, inflation is coming down, manufacturing is coming back, and our economy is still the envy of countries across the world. While we are making great progress, there is one simple solution that can super charge this golden era: a pro-business, pro-growth tax bill.
During my time in Congress, I have traveled across the country, meeting with small businesses that are the heart and soul of our local communities. One of the most common pieces of feedback that we hear is how federal regulations are stifling innovation and killing jobs. My priority in Congress is to cut red tape and to fight to keep more money in the hands of the American people.
One common sense step would be for Congress to fix the interest deduction for businesses as part of the major legislation Republicans are developing to expand tax relief and accelerate economic growth.
As many business owners will tell you, before they can turn a profit or reinvest in their companies, they need to take out loans to buy equipment, market their services, and hire staff. Unfortunately, loans today are a significant expense, and the rising cost is making it extremely challenging for businesses to borrow — if they can borrow at all.
Before 2018, businesses could deduct the full cost of their interest expenses on their taxes. That was a sensible policy: when businesses borrow to launch new products, hire employees, expand to new locations, and otherwise grow, they are benefiting our economy. And when businesses are taking the risk to invest and grow, they should be able to deduct the costs of borrowing similar to any other business expense.
Unfortunately, interest expense deductions are no longer fully deductible, and are severely limited by a section of the tax code known as the 163(j) limitation. Businesses can now deduct an amount equal to just 30 percent of earnings before interest and taxes, and they must use a strict calculation that does not account for the depreciation of assets like equipment. Small businesses are now facing higher taxes as a result.
Businesses are facing these high taxes because Congress did not act and simply let a provision expire. And the changes happened just as the Biden administration’s policies drove interest rates to record highs, creating a double blow for business owners who now face extraordinary costs.
Federal regulations are suffocating our economy and making it impossible for entrepreneurs to start a business or current business owners to grow their companies. Our workers, businesses and economy are all paying the price. We can do better. Deregulation is critical.
While I am hopeful that the Federal Reserve will lower interest rates soon — giving relief to consumers and businesses alike — that will not fix the business interest deduction. As part of the Republican tax bill, I am working with my colleagues to raise the interest deduction to 50 percent and to use the more generous EBITDA calculation, which accounts for depreciation. Doing so will allow our economy to boom and grow like never before.
Having spent the early part of my career working as a credit manager, I saw firsthand how access to affordable credit is why so many businesses in our state are successful. We should do all that we can to preserve that. American businesses should not be penalized for investing in their future, and they should not be forced to send the IRS more money for the bloated federal budget.
As we embrace this new era of growth, we need a pro-business tax code that will deliver the brighter future we all want. That is why Republicans in Congress are going to work with President Trump to raise the interest deduction to ease the burden on high interest expenses so that American businesses can keep growing, creating jobs and reinvesting in our local communities.
Byron Donalds represents Florida’s 19th Congressional District in the U.S. House of Representatives.