Business Interest Deduction and 100 Percent Expensing

Several recent tax reform proposals, including that of candidate Jeb Bush, recommend eliminating the interest deduction but allowing the cost of long-lived property to be deducted entirely in the purchase year (rather than depreciated over time). Professor Geier here criticizes the tendency of some commentators (particularly in the popular press) to assume that these proposals have separate justifications and are packaged together simply to make the elimination of interest deductions more palatable. She explains that the point of these reform proposals is not to tweak the income tax but to shift from an income tax base to a cash-flow consumption tax at the business level, where denial of interest deductions is necessary to prevent inefficient (and costly) rent-seeking behavior under 100 percent expensing