U.S. companies have had a long love affair with debt, and Washington has tacitly approved. Although the tax benefits are not the only driver of corporate America’s preference for loans — cheap rates and corporate strategy, as in Macy’s case, are other major factors — the tax code often tips the scales toward using debt for deals or for expanding a business.
Over the past generation, debt in America has exploded, becoming a way of life in nearly every sphere of society. And the tax code has been its handmaiden. Home buyers, towns and corporations all enjoy tax breaks that grow as they borrow more. Indeed, federal officials have found that the deductions for business debt are so generous that the government is, in many cases, essentially paying companies to borrow.
The surge in borrowing has opened new markets and financial industries. It has also at times powered economic growth — for instance, the boom preceding the housing bust — and activities that wouldn’t have been possible under other conditions. Commercial developers build projects they otherwise wouldn’t. Private equity firms are able to buy out companies with huge sums of borrowed money. Big banks that lend out all this borrowed money have come to play an outsize role in the economy.
[…]
“The tax code is interfering dramatically with the choice of how you finance and how you deliver returns in the corporate sector,” said Douglas Holtz-Eakin, an economist who heads the American Action Forum. “Why would you build into the tax code a permanent bailout for corporate debt-financed investments?”
Our money supply comes from debt. Without debt there would be no money and the economy would die.
The problem is that we are now pushing up against real limits to economic growth which cannot be worked around as seen in the video in #8. As a result of these limits, banks are lending less.
#30–Mike==I think the article “lies.” Debt financing is an option “if you qualify.” If you don’t, you may want to sell part of your company by way of offering stock. Pro’s and Con’s/Requirements to every type of capital generation.
I don’t see any “limitation on growth” as it relates to debt. Right now, one view is that the Banks can make more money by lending it to the Government by buying bonds. No risk, secure, easy to manage. Why lend money to real people and put up with that hassle?
33,
bO,
They keep changing the rules.
They had the gov. change rules.
they handle things but STUPID RULES..(how much is the corp worth, in STOCK, is how much you can BUY, FORCE the value up and you get more)..
The OLD standard rules of business have GONE OUT THE DOOR, with the baby(money)..
They DONT CARE how the economy is SUPPOSED to work.
They PUSHED the stock market in 2000, JUST TO SHOW THEY COULD…they couldnt go BACKWARDS AFTER, otherwise the market WOULD HAVE FAILED THEN. Like being PUSHED to the edge of a SLIDE, to see how close you can get…OPPS and AWAY you go. There are STILL major parts that will hit the slide.
BUT, many BANKS are pulling money BACK..look at the price of foods..LAST year it started, and this year, its happening again, its a TOTAL of about 50+% increase..in 2 years. Im not even counting the 30+% in the 10 years BEFORE..
#31, so you support a tax rate of 69% on income over forty thousand, and 81% on income over seventy thousand? These were the rates in 1963(source:Mad Men). The Treasury has a fund where you can write voluntary checks in excess of your regular income tax. If you qualify, I hope you take the opportunity to provide your appropriate level of taxation.
#31–Chris or Anyone: How exactly are you penalized if you don’t take MediCare on reaching age 65? I thought you were “in” MediCare whether you apply or not and I assume most people don’t confirm their status until they get sick and then care about it?
Same with SS?
More anti-government scare talk made up by the BS right?
bo,
they have capped SS,
My step father died, so they had to determine how much my mother was to get..Either HIS or HER SS.. IT USED to be, that SS would go up with TIME if you DIDNT CLAIM IT, even IF’ you claimed it..it started at a LOW point and went up a small % each year. My mother at age 70, is getting $700 per month. After working over 40 years.
the REAL problem with SS…only the POOR and lower classes put MONEY IN IT..everyone else uses a retirement fund..When it fails they go STRAIGHT to SS.
SS and medicare, are WEIRD.. you still pay for MEDICAL, unless you DONT make enough on SS.
Then Medicaid(state) can assist.
Where I am..
If you make LESS then $850 TOTAL with SS/Medicare. They cover my Deduction..and the 20% bill.
If you make over $900, you PAY your deductible. but you get drug coverage.
THEn if you make over $6000 in 1 year, they DING you EQUAL to the $6000.
SS gives you $800/per month, $9600 per year..
You cant make over $600 per month or LOOSE your benefits..$7 per hour for 2 weeks. At 10 months you have to QUIT.
Also it USED to be..
at 65, you could take SS.
But you could delay it, for a few years to get MORE. About 10% more per year of work.
Start at $600 per month..
Goto 66 and get $660..
BUT, they have changed the retirement age EACH year in the last 10 years.
ALSO, you are only graded for SS, on the last 10 years of earnings.
ECA = sounds complicated. Still don’t see any “penalty” though.
The penalty I can think of is that “by law” if you are MediCare qualified it is illegal for Docs to charge you more? I’ve heard that several times, but don’t believe it. Surely, if a rich person wants to pay more for something that should be legal==or do you indeed have to leave the country to get ripped off?
Not getting rippied off. Yes, quite a penalty.
13, Bobbo,
Isn’t that why Chairman Obama got elected? He was ushered in for hope and change.
Guyver==Obama was the clear choice against McSame. Will probably be the clear choice against the Teaparty Nominated Puke Candidate in 2012.
But as for hope and change==he’s failing miserably on things he could have done himself without having to deal with the corrupt Puke’s.
The speeches are nice, I’d like to see better performance. AND I’m not talking about the economy per se. BushtheRetard dug so deep a whole I expected 10 years to dig us out BUT there are other things Obama could be doing to show the change and bring the hope.
It ain’t happening.
39 Bo..
Think about SURVIVING with $800 per month on Social security and medicare/medicaid..
Then THINK what it costs to get $1000 per month..
Social security/medicare..and are REQUIRED to pay about $100 per month, AND 20% of medical care and ALL your drugs.
tHINK ABOUT WORKING ON THE SIDE, and earning $600 in 1 month…social security gets cut off, and you pay ALL your medical.
#36
Example from medicare info website. Not claiming strict accuracy, but this the gist of what I heard from someone facing the choice:
Still never heard of somebody getting kicked out for earning too much. Would be interested in that…
Thanks Chris==Do we “need” Part B coverage? But, I am on notice that this all needs to be checked out==along with, if I’m in good health, does it make sense to pay the penalty when the time comes?
Adverse Selection – no matter what Sea Lawyer says.