United States Senate Committee on Finance: Debt versus Equity: Corporate Integration Considerations

Jody Lurie, VP, Corporate Credit Analyst, Fixed Income Strategy and Research, testifies at the United States Senate Committee Hearing on the effect of corporate integration on bonds and interest.

"Under the current tax system, corporations receive a deduction for interest payments on debt securities (such as bonds), resulting in only one layer of tax on the debt side. Since a corporation does not receive a deduction for dividend payments, the system promotes debt financing over equity financing, all else equal. While corporate integration in theory could equalize the treatment between equity and debt, it may also cause unintended consequences and should be examined with caution. I have identified seven outcomes that are likely to occur from corporate integration."

Watch Jody's full testimony here.
Download/print a written version here.