The US tax structure influences a firm's willingness to finance with debt. The tax structure encourages more debt.
How does the U.S. tax structure encourage debt?
In the United States, interest on debt payments is tax deductible which means that paying interest on debt reduces the tax that a person has to pay.
As a result, companies are more likely to finance operations with debt because it would mean that as they pay it back, the tax structure would lead to them paying less taxes.
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