White House advisers are examining whether to curb the corporate tax code’s bias toward raising money from tax-deductible debt issues rather than from stock sales...
Tax experts for decades have bemoaned the tax code’s bias toward debt over equity: Interest on most corporate debt is tax deductible, while dividend payments are not.
“The disparity between debt and equity financing encourages corporations to finance themselves more heavily through borrowing. This leverage in turn increases the financial fragility of the economy, an effect we are seeing quite dramatically today,” Jason Furman, now deputy director of Mr. Obama’s National Economic Council, told a congressional panel last year.
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