Sign up for our daily briefing

Make your busy days simpler with Axios AM/PM. Catch up on what's new and why it matters in just 5 minutes.

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Catch up on coronavirus stories and special reports, curated by Mike Allen everyday

Catch up on coronavirus stories and special reports, curated by Mike Allen everyday

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Denver news in your inbox

Catch up on the most important stories affecting your hometown with Axios Denver

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Des Moines news in your inbox

Catch up on the most important stories affecting your hometown with Axios Des Moines

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Minneapolis-St. Paul news in your inbox

Catch up on the most important stories affecting your hometown with Axios Twin Cities

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Tampa Bay news in your inbox

Catch up on the most important stories affecting your hometown with Axios Tampa Bay

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Charlotte news in your inbox

Catch up on the most important stories affecting your hometown with Axios Charlotte

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

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

Updated 8 mins ago - World

Biden reviews U.S. arms deals with Saudi Arabia and UAE

Trump struck several large arms deals with Mohammed bin Salman (L) and Saudi Arabia. Photo: Kevin Dietsch-Pool/Getty Images

The Biden administration has put on hold two big arms deals with Saudi Arabia and the United Arab Emirates which were approved in the final weeks of the Trump administration, a State Department official told Axios.

Why it matters: The sales of F-35 jets and attack drones to the UAE and a large supply of munitions to Saudi Arabia will be paused pending a review. That signals a major policy shift from the Trump era, and may herald sharp tensions with both Gulf countries.

Trump supporter found with pipe bombs accused of plot to attack Democrats

Five improvised explosive devices that the FBI says "were fully operational and could cause great bodily harm or injury if handled improperly." Photo: FBI/Justice Department

The FBI believes California Gov. Gavin Newsom (D) and the Bay Area headquarters of Twitter and Facebook were targets of a man facing federal explosives charges, according to a criminal complaint.

Driving the news: Prosecutors charged Ian Benjamin Rogers after finding weapons including five pipe bombs, 49 guns and thousands of rounds of ammunition following a Jan. 15 search of his Napa County home and auto repair business. His alleged goal was to ensure former President Trump remained in office.

4 hours ago - Health

Fauci: COVID vaccine rollout needs to prioritize people of color

Anthony Fauci. Photo: Alex Wong via Getty Images

Infectious disease expert Anthony Fauci highlighted the need to address racial disparities in the COVID-19 vaccination process, per an interview with The New England Journal of Medicine on Wednesday.

What he’s saying: "I think that's the one thing we really got to be careful of. We don't want in the beginning ... most of the people who are getting it are otherwise, well, middle-class white people."