House to Consider Bonus Depreciation

July 07, 2014

The U.S. House of Representatives is currently considering tax extenders, the renewal of expiring or recently expired tax provisions. Among other provisions, the House is considering a permanent extension of 50 percent bonus expensing, otherwise known as bonus depreciation.  This allows businesses to immediately deduct, or expense half of their investment in equipment and short-lived structures, unlike the current depreciation system that delays these deductions for years or decades.

We’ve released a new study that examines the long-term economic effects of adding 50 percent expensing to the tax reform package developed earlier this year by House Ways and Means Chairman Dave Camp (R-MI). It turns out that  adding permanent bonus expensing to the Camp Plan would boost GDP, wages, job creation, and federal revenue. Here are the details:

Positive Effects of Adding Bonus Expensing to the Camp Tax Reform Plan

Economic and Budget Changes vs. Current Law
(billions of 2013 dollars except as noted)

 

Camp Draft vs. Current Law

Camp Draft Adding 50% Bonus Expensing

GDP

0.22%

1.81%

$GDP ($ billions)

$35.5

$295.3

Private business GDP

0.27%

1.93%

Private business stocks

-0.18%

4.41%

Wage rate

-0.21%

1.13%

Private business hours of work

0.50%

0.81%

Jobs (thousands)

486

780.5

 

 

 

Static federal revenue estimate, GDP assumed constant ($ billions)

-$30.4

-$52.8

Dynamic federal revenue estimate after GDP gain or loss ($ billions)

-$21.2

$12.4

 

 

 

Weighted average service price

% Change

% Change

Corporate

0.48%

-2.84%

Noncorporate

0.46%

-1.23%

All business

0.47%

-2.36%

To read the full report, click here. For more information on bonus depreciation, click here.

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