How a 1954 Tax Rule Shapes Today's Corporate Debt

Lucas and Luna break down Section 163(j) of the tax code, a 1954 rule that limits how much interest corporations can deduct. They trace its origins — why Congress originally capped interest deductions after a wave of corporate takeovers — and examine how it plays out in 2026. With corporate debt at roughly $13 trillion and the Federal Reserve holding rates higher than the 2010s, the interest deduction limit is binding on more companies than ever. They use the 2023 Bed Bath & Beyond bankruptcy as a concrete example: its interest coverage ratio fell below the threshold, accelerating its collapse. Lucas argues that the rule, originally designed to curb excessive leverage, now acts as a hidden stabilizer in a high-rate economy. Luna pushes back on whether it also suppresses productive borrowing. They discuss how the Tax Cuts and Jobs Act tightened the rule in 2018 and why some business groups are lobbying for looser limits. A specific, numbers-driven conversation about a dry-sounding provision with real economic stakes. #TaxPolicy #Economics #CorporateTax #Section163j #InterestDeduction #CorporateDebt #Leverage #TaxCutsAndJobsAct #BedBathAndBeyond #Bankruptcy #FederalReserve #InterestRates #BusinessPodcast #FexingoBusiness #FiscalPolicy #DebtMarkets #TaxReform #EarningsStripping Keep every episode free: buymeacoffee.com/fexingo