Under current law, the maximum deduction for interest on business loans is limited to 30 percent of EBITDA (earnings before interest, taxes, depreciation, and amortization). This standard will become more restrictive in 2022, increasing the tax liability and financing costs for many capital-intensive businesses. This change will make it difficult for these businesses to raise capital for investment, while constraining their operating budgets.

Of the thirty-five countries that have earnings-based limitations like the United States, all now employ an EBITDA rather than an EBIT standard. A change to an EBIT-based limitation will increase the after-tax cost of capital for companies affected by the change, likely resulting in reduced investment, reduced economic growth, lower average labor productivity and ultimately lower wages.

Taxpayers affected by the change from EBITDA to EBIT would generally be affected in large ways, with major reductions to their eligible interest deductions, large increases in their tax liabilities, or both. On average, taxpayers affected by the change will see close to a three-fold increase in their incremental tax as a result of the change. However, the change is much higher in some industries. For instance, the average accommodations and food services industry taxpayer will see a 35x increase in its incremental tax liability.