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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,
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have informed smarter tax policy
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@2018 Tax Foundation
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Designer, Dan Carvajal
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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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