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1 Stephen J. Entin & Michael Schuyler, Adding Bonus Expensing to the Camp Tax Reform Plan 1 (2014)

handle is hein.taxfoundation/taxfaad0001 and id is 1 raw text is: TAX OWii.
FOUNDATION Adding Bonus Expensing to the
FAT                        Camp Tax Reform Plan
By Stephen J. Entin            Michael Schuyler
Senior Fe ow               Fe ow
Congress is currently considering tax extenders, the renewal of expiring or recently
expired tax provisions. Among the provisions is 50 percent bonus expensing,
otherwise known as bonus depreciation. The extender provision passed by the
House Ways and Means Committee, currently under consideration by the whole
House of Representatives, would make 50 percent bonus expensing a permanent
feature of the U.S. cost recovery system.
Fifty percent bonus expensing allows businesses to immediately write off, or
expense, half of their investment in equipment and short-lived structures (assets
with twenty year lives or less). It does not apply to commercial and residential
buildings or factories.
Bonus expensing moves the timing of depreciation write-offs closer to the time
of purchase. This brings the write-offs closer to the full value of the cost of the
investment, reducing the after-tax cost of acquiring capital assets and moving the
tax treatment of cost recovery toward tax neutrality (when taxes fall with equal
impact on income used for investment or consumption).
If made permanent, bonus expensing would induce firms to acquire and
maintain a larger stock of equipment. The added capital would expand domestic
production, raise productivity and wages, and increase employment.
Adding Bonus Expensing to the Camp Plan Would Grow the
Economy, Lift Wages, and Raise Revenue
In previous papers,1 we used the Tax Foundation's Taxes and Growth Model to
examine the effect of the tax reform proposal recently released by Ways and Means
Chairman Dave Camp (R-MI), and, separately, to model the effect of adding
50 percent bonus expensing to present law. In this paper, we model the effect of
adding 50 percent bonus expensing to the Camp proposal.
1  See, e.g., Stephen J. Entin, Michael Schuyler, & William McBride, An Economic Analysis of the Camp Tax
Reform Discussion Draft, TAX FOUNDATION SPECIAL REPORT No. 219 (MAY 14, 2014), http://taxfoundation.
org/article/economic-analysis-camp-tax-reform-discussion-draft. See also William McBride, Some Tax
Cuts Pay for Themselves, TAX FOUNDATION TAX POLICY BLOG, MAY 29, 2014, http://taxfoundation.org/blog/

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