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Private equity firms are pushing for a new tax benefit to significantly increase the business debt they can deduct from taxes. Currently, businesses can deduct up to 30% of their income as interest on debt. However, private equity firms want to use an alternate accounting measure, earnings before interest, taxes, depreciation, and amortization (EBITDA), which could boost deductions by up to 15%—resulting in billions in tax savings for private equity firms.
This new tax perk would also benefit other companies that use debt to finance operations, including manufacturers, who have joined private equity firms in lobbying Congress to pass the tax break. While this could marginally benefit U.S. manufacturing, the real winners would be the private equity giants, such as Blackstone and KKR, who would profit from even more debt financing.
The policy could cost taxpayers $175 billion over the next decade, according to Treasury estimates, forcing a shortfall in tax receipts that could lead to higher taxes or cuts in government programs. Critics argue that this perk would benefit the wealthy, leaving ordinary taxpayers to shoulder the burden.
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