Impact of Interest Deductibility on Manufacturers

This document is a report that outlines the implications of interest deductibility for manufacturers in the United States. It explains how the tax code treats business loans, specifically detailing the changes in the interest deductibility cap from an EBITDA-based standard to an EBIT-based standard following tax reform in 2022. The report highlights the significance of interest deductibility for capital-intensive industries like manufacturing, where companies often rely on debt financing for long-term investments. It discusses the negative impact of the stricter EBIT-based limitation on manufacturers' ability to finance growth and create jobs. The report also addresses the competitive disadvantage faced by U.S. manufacturers compared to other countries with more favorable interest deductibility standards. Furthermore, it emphasizes the need for Congress to reinstate the EBITDA-based standard to support financing for job-creating investments in the manufacturing sector, particularly in light of rising interest rates and the potential for decreased liquidity.