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NAM study: Stricter interest expense limitation disproportionately impacts manufacturing sector
- October 19, 2023
- News Release
- Shop Management
The National Association of Manufacturers has released a new analysis on the impact to the U.S. economy of Congress’ failure to reverse the stricter interest expense limitation that took effect in January 2022.
The jobs impact of the stricter limitation has nearly doubled over the past year given congressional inaction to ensure a pro-growth interest deductibility standard as interest rates have continued to rise. The data show that limiting manufacturers’ ability to deduct interest on debt-financed investments, over the long run, could cost the U.S. economy up to 867,000 jobs, $58 billion of employee compensation, and $108 billion in GDP.
“A stricter interest expense limitation restricts manufacturers’ ability to invest in new equipment and create jobs. This analysis clearly shows that failing to reverse this damaging change will cut close to 900,000 jobs and billions of dollars of employee pay and harm economic growth. Even more, the study finds that manufacturers and related industries bear 77% of the burden of this policy,” said NAM Managing Vice President of Policy Chris Netram. “Congress must act by year’s end to restore a pro-growth interest deductibility standard and allow manufacturers to continue to invest for the future.”
Before 2022, the interest expense limitation was calculated based on a company’s earnings before interest, tax, depreciation, and amortization. Last year, a stricter limitation based on a company’s earnings before interest and tax took effect. By excluding depreciation and amortization from the calculation, the stricter limitation increases the tax burden on manufacturers that make investments in long-lived capital equipment.
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