Job Losses Under New Tax Law Already Beginning

Under the new U. S.  tax law, corporate interest deductions are capped at 30 % of adjusted taxable income (ATI).  I have already seen a privately owned company (owned by a private equity firm) announcing major layoffs effective at year end and internally communicate the new tax law  will result in paying higher taxes. 

Most of the companies which will pay more taxes as the result of the new tax law limit on interest expense deductions are privately held companies which were bought in leveraged buyouts (LBO) involving the issuance of debt.  Often, privately held companies owned by privately equity firms will also issue debt to insure annual fee payments to the private equity firm owner.  In my experience as a business consultant, I have never seen a company bought by private equity firms efficiently run. 

The private equity firms do not understand how to run a quality growth company.  They do not take the time to understand the company and merely crunch numbers making decisions which often negatively impact long term growth.  This will make it difficult to ever take the company  public and end up selling it to another private equity company which will continue bleeding cash from the company to their pockets.

The company I have information on is laying an unknown number of managerial employees off including efficient, and operationally necessary, managers.  The vast majority of this company's non-managerial employees are part time who never see a pay raise from the starting salary of $10 per hour and will be effected by the inefficient management of managers with too many employees.

Since the majority of these companies are privately held, there will be no public announcements of layoffs temporary hiding the negative growth effects of this new U. S. tax law, which was falsely sold as economically stimulative.

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