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252 IRET Congressional Advisory 1 (2009)

handle is hein.taxfoundation/iretcgadv0249 and id is 1 raw text is: INSTITUTE FOR RESEARCH ON THE ECONOMICS OF TAXATION IRET is a non-profit 501 (c)(3) economic policy research and educational organization devoted to informing the public about policies that will promote growth and efficient operation of the market economy. February 6, 2009 Advisory No. 252 A STIMULUS ALTERNATIVE A far simpler, smaller, and better-focused stimulus package could do more for the economy than the bloated bill now making its way through the Senate, at a fraction of the cost. Even at $780 billion, the trimmed down bill is still far too big and riddled with ineffective and wasteful provisions. The entire bill, tax and spending provisions alike, should be pulled and replaced with a few simple provisions that would address the needs of the unemployed and get investment and GDP growing moving again. A simple, effective substitute for the package: * The unemployment extension provision from the package. * The Alternative Minimum Tax patch from the package. * Extension of the 2008 bonus expensing provision and small business expensing provision in the package, but make it permanent, or at least for four years. * A reduction in the depreciation life for structures from 39 years to 25. (It would also help small businesses if you reclassify built-ins such as lunch counters and shelving and heating and cooling systems as equipment rather than parts of the structure so they can be written off quickly.) These provisions would: * Help people pay their bills until they find new private sector jobs. (The provision should be moderate and temporary to avoid prolonging job search.) * Do the necessary AMT patch for the year to keep millions of middle class taxpayers from being dragged into the AMT. * Encourage investment in equipment by large and small businesses, putting some of the saving being done by discouraged consumers to work in a useful way (not wasting it on pork). * Spur the construction of new commercial and office buildings, which would also put saving to work and pick up some of the slack from the depressed home-building sector, not to mention putting a floor under that end of the real estate market to prevent the securities market contagion from spreading. Note that the bonus expensing provision is for equipment only, not structures (except specialty structures of 20 years or less). Yet structures, with their very long asset life, are the most discriminated against and over-taxed asset class. People are saving more, which is actually a good thing. But that saving has to be put to work via the credit markets. If private businesses are not borrowing to invest in useful capital, because it is not profitable, then we will have a painfully slow recovery. If private investment is not worth doing, then the Federal Reserve will be unable to boost things by creating more bank reserves, because people will have no motive to borrow. The Federal Reserve will be pushing on a string. We can solve that problem by making investment more profitable, so the private sector will be pulling on the string, and the Fed will not have to g~,fl S I 66. 6 Agg

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