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1 Erica York & Alex Muresianu, The TCJA's Expensing Provision Alleviates the Tax Code's Bias against Certain Investments 1 (2018)

handle is hein.taxfoundation/tcjaexp0001 and id is 1 raw text is: The TCJA's Expensing Provision Alleviates the Tax Code's Bias Against Certain Investments FISCAL FACT No. 610 Sept. 2018 Erica York Analyst Alex Muresianu Research Assistant The Tax Foundation is the nation's leading independent tax policy research organization. Since 1937, our research, analysis, and experts have informed smarter tax policy at the federal, state, and local levels. We are a 501(c)(3) nonprofit organization. @2018 Tax Foundation Distributed under Creative Commons CC-BY NC 4.0 Editor, Rachel Shuster Designer, Dan Carvajal Tax Foundation 1325 G Street, NW, Suite 950 Washington, DC 20005 202.464.6200 taxfoundation.org Key Findings * The Tax Cuts and Jobs Act (TCJA), passed by Congress in December 2017, made significant progress in improving the cost recovery treatment of business investment by enacting 100 percent bonus depreciation for short- lived assets. * This provision allows businesses to immediately deduct the full cost of short- lived investments, similar to the treatment of other business expenses, rather than stretching deductions over many years. However, it is only scheduled to be in full effect for five years, then phase down. It will expire in its entirety at the end of 2026. * If the TCJA had featured permanent 100 percent bonus depreciation, instead of temporary, it would have been the most powerful pro-growth provision in the bill per dollar of revenue forgone. While the temporary provision does generate short-term economic growth, that growth dissipates by the end of the budget window as it sunsets. * We estimate that making the TCJA bonus depreciation provision permanent would result in a 0.9 percent larger economy, a 2.2 percent larger private capital stock, 0.8 percent higher wages, and 172,300 additional full-time equivalent jobs. * The 10-year revenue cost of permanence is $141 billion on a conventional basis; when accounting for additional economic growth, the 10-year revenue cost is $98 billion. * Allowing 100 percent bonus depreciation to expire would increase the cost of making certain investments in the United States. Policymakers should consider making it a permanent feature of the tax code.

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