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A Blue-Chip Leverage Boom Could Be Unleashed by Biden’s Tax Plan

April 13, 2021, 3:36 PM

Companies are already grousing about U.S. President Joe Biden’s proposal to raise corporate taxes. But highly profitable businesses with low tax bills have an escape hatch in the booming bond market, where they can easily sell debt to keep propping up their earnings.

The Biden overhaul would, among other things, force companies generating at least $2 billion in annual revenue to pay a minimum tax rate of 15% on their “book income,” or the earnings reported to shareholders, not the figure conventionally reported to tax authorities.

This provision may encourage companies to increase their leverage, since the resulting interest ...

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