Among the national public policy issues that are receiving significant news coverage, the Las Vegas Asian Chamber of Commerce is paying particularly close attention to tax reform.
It’s encouraging that our leaders in Washington are finally taking tax reform under serious consideration and, according to House Speaker Paul Ryan and House Ways and Means Chairman Kevin Brady, R-Texas, are ambitiously working to pass legislation by the end of this year.
Overhauling our complex tax code is long overdue.
However, I am concerned about the proposed limitation of interest deductibility and the negative impact it could have on the economy, particularly here in Las Vegas.
The interest deduction has been one of the most essential tools used by businesses — both large and small — for more than a century. It’s a key tool that incentivizes taking smart, calculated risks in launching and growing businesses that create jobs and help strengthen our economy.
Overall, 80 percent of small businesses and 75 percent of startups utilize debt financing to stimulate growth and expand their operations.
This affects 51 million Americans who are employed by businesses that benefit from deducting interest on necessary expenses to keep operations running smoothly.
Essentially, limiting interest deductibility amounts to nothing more than a tax increase on American job creators, and I am cautiously relieved to see that Brady and his colleagues are beginning to recognize that now that they’re hearing from business owners outside of the Beltway.
Recently, Brady announced a number of carve-outs related to interest deductibility that he is considering in revising his tax reform blueprint. While I’m glad revisions are in the works, I would also note that carve-outs are a key indicator of flawed policy. Proposals aiming to limit interest deductibility for some businesses, yet retain it for others, fail to achieve the primary objective sought by lawmakers on tax reform: simplifying the tax code and promoting economic growth.
Simply put, deducting interest is a normal cost of doing business for companies in all sectors of our economy, and it needs to be preserved in the tax code for all businesses.
We have a once-in-a-generation opportunity to completely restructure and modernize the U.S. tax code to ensure that it meets the demands of a 21st century economy, and that it enables businesses to grow and prosper.
Over the next few months, Washington would be wise to listen more closely to business owners outside of the Beltway to better understand the impact of their proposals as they continue to lay the groundwork for a truly innovative plan to reform the American tax code.
Sonny Vinuya is president of the Las Vegas Asian Chamber of Commerce.