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Photo: Evan Vucci / AP

President Trump and Congressional Republicans plan to front-stab private equity later this morning, by unveiling a tax plan that multiple sources say will include a partial cut to corporate interest deductibility. But don't expect to hear any specific percentages, as it hasn't actually been worked out yet.

Why it matters: Private equity returns arguably are driven more by debt than by equity, given that buyout firms often finance the majority of an acquisition with bank loans.

Those loans are put onto the books of the purchased company, which currently gets to deduct 100% of the interest. Or, put another way, 100% deductibility cheapens debt capital for private equity and lowers financial sponsor risk.

Why is this happening? Because Republicans need to come up with some big revenue generators in the absence of the Border Adjustment Tax and the collapse of ACA repeal/replace.

Wait, no numbers? Nope. What's coming out today is more detailed than that one-pager back in April, but not by too much. Ways and Means will need to hammer out the specifics on this piece, as the Big Six is now effectively defunct. One source says that talk is either for a 20-30% reduction in the deductibility, or perhaps a play on debt-to-EBITDA caps that are employed in several European countries. Expectations also are that interest on existing loans would be grandfathered in.

Bigger picture: I'm focusing on private equity here, but the issue is obviously much broader as it affects any company that takes out loans to do such things as buy equipment or build new facilities. It also would have a major impact on the commercial real estate sector.

The BUILD coalition, a pro-biz lobbying group organized around this issue, analyzed corporate earnings calls between July 2016 and February 2017. It found that interest deductibility was mentioned in 16.6% of calls, whereas tax repatriation — an issue that gets a lot more political and media attention — was mentioned in just 14.9% of calls.

Caveats: To be sure, there are going to be plenty of tax carrots today for private equity, including a lowering of the statutory rate to 20% and the likely lack of broad-based carried interest reform. There also will be intense lobbying to minimize the reduction as much as possible, and skepticism remains over tax reform actually getting done in 2017 ("needing a win" doesn't necessarily mean much... just ask Cleveland Browns fans).

Go deeper

4 hours ago - Health

Fauci: Omicron variant will "inevitably" be found in U.S.

Photo: Chip Somodevilla/Getty Images

Anthony Fauci, the director of the National Institute of Allergy and Infectious Diseases, cautioned on Sunday that the COVID-19 Omicron variant will "inevitably" be found in the United States.

Driving the news: Fauci, Biden's chief medical adviser, told ABC's George Stephanopoulos on "This Week" that U.S. officials will meet with colleagues from South Africa later on Sunday to try to determine the severity of the cases, as countries scramble to learn more about the variant.

Updated 6 hours ago - Politics & Policy

Dems fear supply-chain blame

Illustration: Aïda Amer/Axios

As supply-chain kinks drive up prices and disrupt holiday shopping, Democrats are scrambling to show action and deflect blame.

Why it matters: With their party controlling both the White House and Capitol, vulnerable Democrats worry supply-chain snafus will hurt them in next year's midterms.

6 hours ago - World

Scoop: Germany urges Congress not to sanction Putin’s pipeline

Photo: Mikhail Svetlov/Getty Images

The German government has urged members of Congress not to sanction the Nord Stream 2 pipeline, arguing that doing so will "weaken" U.S. credibility and "ultimately damage transatlantic unity," according to documents obtained by Axios.

Why it matters: At a time when roughly 100,000 Russian troops are massing at its border, Ukraine views Nord Stream 2 as an existential threat to its security. The pipeline would circumvent Ukrainian transit infrastructure and deliver Russian gas directly to Germany, eliminating one of the last deterrents Ukraine has against an invasion.