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Yeah, that's a good idea, let's penalize capital formation even more while we're trying to recover from an economic downturn. If you want to level the playing field between debt and equity financing for business, maybe you should make dividend payments deductible so that mature businesses will have more of an incentive to return cash to shareholders.

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Removing the tax shield that some forms of debt provide would only make one avenue of capital raising difficult, it would act much more to encourage other forms of capital raising than to put any kind of stop on it.

This could of course be counterbalanced by making other forms of capital raising easier by doing such things as lowering capital gains tax or, as you suggested, making divident payments deductible.

We got into this "downturn" because too many people borrowed too much, as well as too many lenders being less than careless about who they loaned money to. Failing to fix the incentives to borrow will only make this stuff happen again and again until there is no more economic system left to abuse.

Too many companies are issuing bonds to repurchase stock. And they're not doing it for valid business reasons: they're doing it to puff up their stock prices so that the CEO and Board can get their bonuses - and the vast majority of bonuses at that level are based on stock prices.

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