Republican lawmakers are dangling the prospect of a massive new tax break for businesses as part of their sweeping rewrite of the nation's tax code. But many of America's biggest companies aren't biting.
The proposal, known as full expensing, would allow businesses to write off the entire cost of their capital investments immediately, rather than draw it out over several years. The idea is a key pillar of the blueprint for tax reform from House Republicans, ending what they say are incentives in the current system for companies to rack up debt instead of investing back in the business.
But the proposal also comes with an eye-popping price tag: $2.2 trillion over the next decade. Conservatives are split over whether the measure is worth it, and businesses are worried that the measure will come at the expense of reduced headline rates.
"The lower our corporate tax rate, the more competitive our country will be for jobs and investment. That's why we oppose any provision that stands in the way of lower rates, including full and immediate expensing," said Bill Riggs, spokesman for Freedom Partners, which is backed by the billionaire Koch brothers. "Putting that $2 trillion for expensing towards lower rates would have a greater positive impact on our economy and send a message to the rest of the world that America intends to compete and win."
Freedom Partners was among the most vocal opponents of House Speaker Paul Ryan's other signature proposal, the border adjustment tax. After House Republicans agreed to abandon that effort in July, the group began zeroing in on full expensing as the next roadblock to tax reform.
Joining the fight are a laundry list of corporate America's household names, including AT&T, Boeing, FedEx, Ford and Walmart. They are members of the so-called RATE Coalition that are pushing to make bringing down the corporate rate the primary objective of tax reform.
"We think that is the key variable in tax policy and should have primacy as policymakers consider what to do to make America more job friendly and competitive," said Jim Pinkerton, the group's co-chairman.
Complicating the issue is its connection to another politically popular tax break: the ability of companies to deduct the cost of borrowing money. The House plan gets rid of that benefit and replaces it with full expensing. But interest deductibility is critical to the finance and real estate industries, and they have already begun an extensive lobbying campaign to preserve it.
"Businesses of all sizes borrow in order to finance expansions or meet obligations and the ability to deduct interest expense gives business owners the certainty to make critical operating decisions," the BUILD Coalition — Businesses United for Interest and Loan Deductibility — wrote in a letter to the Senate Finance Committee over the summer. "For many firms, access to credit is essential for working capital, and many of these companies use debt to weather shifts in demand."
The proposal also faces uncertain support in the Senate. Finance Committee Chairman Sen. Orrin Hatch of Utah told CNBC that allowing full expensing is a good idea in principle but complicated in practice.
"I'd like to see that because I think it would be better if they did," he told CNBC in an interview. "But there are a lot of accounting aspects here that have to be taken into consideration. … It's not just a simple little yes or no, but I would like to have a better expensing approach than we have right now."