The Importance of Improving Cost Recovery

Removing tax policy barriers can help businesses and individuals invest, work, create jobs, and lift the economy during a post-pandemic recovery without requiring lawmakers to create new spending programs. One of the most cost-efficient options available to lawmakers is to make permanent and expand the full expensing of capital investment.

While tax rates matter to businesses, so too does the measure of income to which those tax rates apply. Depreciation understates investment costs, overstates business profits, and reduces the after-tax return on the investment—resulting in less capital formation, productivity growth, and economic output. In other words, depreciation requires businesses to pay tax on income that doesn’t exist.

Removing the tax code’s bias against long-term investment by implementing a neutral cost recovery system (NCRS) for structures and full expensing for other assets is estimated to increase economic growth and job creation. Using the Tax Foundation General Equilibrium Model, we estimate that permanent full expensing and neutral cost recovery for structures will add more than 1 million full-time equivalent jobs to the long-run economy and boost the long-run capital stock by 13 percent, or $4.8 trillion.

Download Our Cost Recovery Toolkit For Printable Resources

President Trump Outlines Second Term Tax Ideas

August 25, 2020

Broad themes of the president’s agenda include providing tax relief to individuals and tax credits to businesses that engage in desired activities, while the status of expiring TCJA provisions and tariffs seems uncertain.

How the CARES Act Fixed a Tax Bias Against Green Investment

August 20, 2020

One under-discussed part of the CARES Act, passed in March to provide economic relief during the COVID-19 epidemic, is a correction to a drafting error in the Tax Cuts and Jobs Act of 2017, often known as the “retail glitch.”

New Accelerated Depreciation Policies to Spur Investment in Australia, Austria, Germany, and New Zealand

August 17, 2020

In recent months, several countries have introduced accelerated depreciation as a measure to incentivize private investment, including Australia, Austria, Germany, and New Zealand. There are various ways of how this policy has been implemented in the respective countries, largely depending on the existing standard depreciation schedules.

Economic Recovery and Deductions for Worker Training

August 13, 2020

Tax treatment can affect investment decisions. Extending expensing treatment (full and immediate deductions) to all forms of capital investment, human and physical, would help facilitate sustainable long-run economic growth.

Estimating Neutral Cost Recovery’s Impact on Affordable Housing

August 7, 2020

Housing affordability was a major issue even before the COVID-19 crisis, but the current economic situation has made it more salient. Immediate support for people struggling makes sense now, but lawmakers should also consider long-term solutions to the problem of high rents, namely by expanding the supply of housing.

Details and Analysis of The CREATE JOBS Act

July 30, 2020

Senators Ted Cruz and Martha McSally introduced the CREATE JOBS Act that would make two significant changes to incentivize investment in the United States.

Three-Fourths of New 2016 Investment Was Excluded from Improved Cost Recovery

July 28, 2020

New data sheds light on what share of new business investment was eligible for bonus depreciation as it existed before 2017 tax reform, and what share of new investment was excluded from improved cost recovery. This matters because the income tax is biased against investment in capital assets to the extent that it makes the investor wait years or decades to claim the cost of machines, equipment, or factories on their tax returns.

1980s Tax Reform, Cost Recovery, and the Real Estate Industry: Lessons for Today

July 23, 2020

The Tax Reform Act of 1986 extended depreciation schedules for both commercial and noncommercial of real estate, reducing the attractiveness of those investments.

Attracting Manufacturing to the U.S. Should Start with Neutral Tax Treatment, Not Subsidies

July 13, 2020

Before considering industry-specific laws and subsidies for onshoring, policymakers should make sure the U.S. tax code is not biased against domestic investment in the first place.

Biden’s Plan to Boost Research and Development Should Include Cancellation of Upcoming R&D Amortization

July 13, 2020

As concern over American competitiveness and onshoring of innovative activity increases, presidential candidates and policymakers should keep in mind the tax increases scheduled to take effect in the coming years, including the amortization of R&D and phaseout of the broader expensing provisions.

Improved Cost Recovery Is A Wide-Ranging Policy Solution

July 10, 2020

Rather than limit improvements to certain sectors, lawmakers could pursue a broader policy of full expensing for all capital investment and neutral cost recovery for structures and clear the tax policy hurdles that currently stand in the way of private investment.

FAQ on Neutral Cost Recovery and Expensing

July 10, 2020

Cost recovery is the way the tax code permits firms to recover (or deduct) the cost of making investments. Cost recovery plays an important role in defining a business’ taxable income and can impact investment decisions.

Did 1986 Tax Reform Hurt Affordable Housing?

July 1, 2020

Improving cost recovery for residential structures, while not a silver bullet for solving the housing crisis, would on the margin encourage more construction that would help push rents down across the board.

Estimated Impact of Improved Cost Recovery Treatment by State

June 30, 2020

We estimate that moving to permanent full expensing and neutral cost recovery for structures would add more than 1 million full-time equivalent jobs to the long-run economy and boost the long-run capital stock by $4.8 trillion.

Improving the Tax Treatment of Residential Buildings Will Stretch Affordable Housing Assistance Dollars Further

June 25, 2020

By updating the tax code to allow developers to more fully cover their investments, construction costs will fall, which, in turn, means that federal affordable housing assistance dollars will go that much further in helping low-income tenants.

Why Neutral Cost Recovery Is Good for Workers

June 23, 2020

Studies have shown that accelerated depreciation helps increase wage growth. A recent report found that states that implemented accelerated depreciation in their tax codes led to a 2.5 percent increase in compensation per employee in manufacturing, relative to states that did not.

Full Expensing is Good for the Short Run and the Long Run

June 18, 2020

In the first year of enactment alone, we estimate the combination of full expensing and neutral cost recovery would increase full-time equivalent employment by more than 44,000 jobs. The cumulative impact by year five of the policy would be nearly 200,000 new jobs.

Answering Four Questions About How Neutral Cost Recovery Works in Practice

June 17, 2020

A neutral cost recovery system lowers the short-term cost of the policy to the federal government while providing nearly equivalent economic benefits. While neutral cost recovery is not a new idea, there are several policy questions lawmakers will want to consider when designing this system.

What the Internet Can Teach Us About Capital Investment, Infrastructure, and Tax Policy

June 17, 2020

The lockdowns imposed in response to the COVID-19 pandemic induced an increase in demand for broadband internet, as work from home and other social distancing measures pushed people to spend more time online. As broadband becomes a more important piece of America's infrastructure, it makes sense to look at tax policy that will help drive more investment and better service.

Inefficiencies Created by the Tax System’s Dependence on Economic Depreciation

June 12, 2020

One idea that would help the nation’s economic recovery during the coronavirus crisis would be moving to full expensing of capital investment. The depreciation debate might seem confusing, so the question at hand is: how, when, and by what amount can businesses recognize (or recover) the cost of a capital investment, like a piece of equipment or a new warehouse, on their income tax return?

Neutral Cost Recovery Is Not a New Idea

May 19, 2020

As stated by Rep. Jack Kemp in 1985, “Neutral cost recovery is designed to provide the present value of investment expensing without some of its practical problems.”

Empirical Evidence Shows Expensing Leads to More Investment and Higher Employment

May 19, 2020

The Tax Foundation’s General Equilibrium Model suggests that allowing businesses to immediately deduct or “expense” their capital investments in the year in which they are purchased delivers the biggest bang for the buck in spurring economic growth and jobs compared to other tax policies.

Options for Improving the Tax Treatment of Structures

May 19, 2020

Improving the tax treatment of structures is one of the most cost-effective tax policy changes available to lawmakers as they consider how to remove investment barriers in the tax code to hasten the economic recovery. Policymakers must weigh the trade-offs among long-run economic output goals, revenue constraints, and the existing stock of structures.

Reducing the Bias Against Long-term Investments

May 8, 2020

Other countries have shown that providing deductions in line with invested capital costs can have positive impacts both on investment and on debt bias.

White House Considers Neutral Cost Recovery for Structures

May 6, 2020

When considering long-term policies for increasing long-run levels of investment and economic growth, full expensing and neutral cost recovery are better targeted than policies like a capital gains cut.

Reviewing the Economic and Revenue Implications of Cost Recovery Options

April 28, 2020

Permanent full expensing for all types of investment is an effective policy change lawmakers can use to encourage additional investment and economic growth.

Reviewing the Benefits of Full Expensing for the Post-Pandemic Economic Recovery

April 27, 2020

One of the most cost-effective policy changes would be to make full expensing of machinery and equipment permanent and extend this important tax treatment to structures as well as for firms in a net operating loss position.

Tax Policy After Coronavirus: Clearing a Path to Economic Recovery

April 22, 2020

Governments at all levels must work to remove the tax policy barriers that stand in the way of economic recovery and long-term prosperity following the COVID-19 crisis. Our new guide outlines several comprehensive options that policymakers can take at the federal and state levels.

Tax Policy to Bridge the Coronavirus-Induced Economic Slowdown

March 18, 2020

Tax policy can help by giving businesses current access to future tax “assets”—deductions and credits the businesses will be allowed or owed over time any way under current law—instead of making them wait.

Comparing the Growth and Income-Boosting Effects of Tax Reform Options

March 9, 2020

As policymakers evaluate changes to the tax code, such as proposals coming from presidential candidates and the White House, it will be important for them to evaluate the relative effects of various provisions. According to our analysis, making full expensing permanent would be one of the most efficient ways to increase after-tax incomes for the middle class.

Toomey Introduces Legislation to Make Bonus Depreciation Permanent and Fix the Retail Glitch

February 14, 2020

Making 100 percent bonus depreciation permanent avoids the uncertainty associated with the phaseout of a powerful pro-growth policy and would provide a cost-effective boost to long-run economic output, wages, and employment in the United States.

Economic and Budgetary Impact of Extending Full Expensing to Structures

January 7, 2020

Full expensing is one of the most powerful pro-growth policies in terms of revenue forgone. Given that structures comprise a large share of the private capital stock, improving their tax treatment would end a large bias against investment in the tax code.

Legislation Introduced to Cancel R&D Amortization

October 2, 2019

Canceling the amortization of research and development costs would reduce federal revenue, but policymakers have a variety of options to offset the costs.

Depreciation Requires Businesses to Pay Tax on Income That Doesn’t Exist

May 21, 2019

While tax rates matter to businesses, so too does the measure of income to which those tax rates apply. The corporate income tax is a tax on profits, normally defined as revenue minus costs. However, under the current tax code, businesses are unable to deduct the full cost of certain expenses—their capital investments—meaning the tax code is not neutral and actually increases the cost of investment.

Amortizing Research and Development Expenses Under the Tax Cuts and Jobs Act

February 5, 2019

Expensing, or the immediate write-off of R&D costs, is a valuable component of the current tax system. The TCJA’s change to amortization in 2022, requiring firms to write off their business costs over time rather than immediately, would raise the cost of investment, discourage R&D, and reduce economic output.

President Trump Outlines Second Term Tax Ideas

August 25, 2020

Broad themes of the president’s agenda include providing tax relief to individuals and tax credits to businesses that engage in desired activities, while the status of expiring TCJA provisions and tariffs seems uncertain.

Economic Recovery and Deductions for Worker Training

August 13, 2020

Tax treatment can affect investment decisions. Extending expensing treatment (full and immediate deductions) to all forms of capital investment, human and physical, would help facilitate sustainable long-run economic growth.

Details and Analysis of The CREATE JOBS Act

July 30, 2020

Senators Ted Cruz and Martha McSally introduced the CREATE JOBS Act that would make two significant changes to incentivize investment in the United States.

Three-Fourths of New 2016 Investment Was Excluded from Improved Cost Recovery

July 28, 2020

New data sheds light on what share of new business investment was eligible for bonus depreciation as it existed before 2017 tax reform, and what share of new investment was excluded from improved cost recovery. This matters because the income tax is biased against investment in capital assets to the extent that it makes the investor wait years or decades to claim the cost of machines, equipment, or factories on their tax returns.

Attracting Manufacturing to the U.S. Should Start with Neutral Tax Treatment, Not Subsidies

July 13, 2020

Before considering industry-specific laws and subsidies for onshoring, policymakers should make sure the U.S. tax code is not biased against domestic investment in the first place.

Biden’s Plan to Boost Research and Development Should Include Cancellation of Upcoming R&D Amortization

July 13, 2020

As concern over American competitiveness and onshoring of innovative activity increases, presidential candidates and policymakers should keep in mind the tax increases scheduled to take effect in the coming years, including the amortization of R&D and phaseout of the broader expensing provisions.

Improved Cost Recovery Is A Wide-Ranging Policy Solution

July 10, 2020

Rather than limit improvements to certain sectors, lawmakers could pursue a broader policy of full expensing for all capital investment and neutral cost recovery for structures and clear the tax policy hurdles that currently stand in the way of private investment.

FAQ on Neutral Cost Recovery and Expensing

July 10, 2020

Cost recovery is the way the tax code permits firms to recover (or deduct) the cost of making investments. Cost recovery plays an important role in defining a business’ taxable income and can impact investment decisions.

Did 1986 Tax Reform Hurt Affordable Housing?

July 1, 2020

Improving cost recovery for residential structures, while not a silver bullet for solving the housing crisis, would on the margin encourage more construction that would help push rents down across the board.

Estimated Impact of Improved Cost Recovery Treatment by State

June 30, 2020

We estimate that moving to permanent full expensing and neutral cost recovery for structures would add more than 1 million full-time equivalent jobs to the long-run economy and boost the long-run capital stock by $4.8 trillion.

Improving the Tax Treatment of Residential Buildings Will Stretch Affordable Housing Assistance Dollars Further

June 25, 2020

By updating the tax code to allow developers to more fully cover their investments, construction costs will fall, which, in turn, means that federal affordable housing assistance dollars will go that much further in helping low-income tenants.

Why Neutral Cost Recovery Is Good for Workers

June 23, 2020

Studies have shown that accelerated depreciation helps increase wage growth. A recent report found that states that implemented accelerated depreciation in their tax codes led to a 2.5 percent increase in compensation per employee in manufacturing, relative to states that did not.

Full Expensing is Good for the Short Run and the Long Run

June 18, 2020

In the first year of enactment alone, we estimate the combination of full expensing and neutral cost recovery would increase full-time equivalent employment by more than 44,000 jobs. The cumulative impact by year five of the policy would be nearly 200,000 new jobs.

Answering Four Questions About How Neutral Cost Recovery Works in Practice

June 17, 2020

A neutral cost recovery system lowers the short-term cost of the policy to the federal government while providing nearly equivalent economic benefits. While neutral cost recovery is not a new idea, there are several policy questions lawmakers will want to consider when designing this system.

What the Internet Can Teach Us About Capital Investment, Infrastructure, and Tax Policy

June 17, 2020

The lockdowns imposed in response to the COVID-19 pandemic induced an increase in demand for broadband internet, as work from home and other social distancing measures pushed people to spend more time online. As broadband becomes a more important piece of America's infrastructure, it makes sense to look at tax policy that will help drive more investment and better service.

Inefficiencies Created by the Tax System’s Dependence on Economic Depreciation

June 12, 2020

One idea that would help the nation’s economic recovery during the coronavirus crisis would be moving to full expensing of capital investment. The depreciation debate might seem confusing, so the question at hand is: how, when, and by what amount can businesses recognize (or recover) the cost of a capital investment, like a piece of equipment or a new warehouse, on their income tax return?

Neutral Cost Recovery Is Not a New Idea

May 19, 2020

As stated by Rep. Jack Kemp in 1985, “Neutral cost recovery is designed to provide the present value of investment expensing without some of its practical problems.”

Empirical Evidence Shows Expensing Leads to More Investment and Higher Employment

May 19, 2020

The Tax Foundation’s General Equilibrium Model suggests that allowing businesses to immediately deduct or “expense” their capital investments in the year in which they are purchased delivers the biggest bang for the buck in spurring economic growth and jobs compared to other tax policies.

Reducing the Bias Against Long-term Investments

May 8, 2020

Other countries have shown that providing deductions in line with invested capital costs can have positive impacts both on investment and on debt bias.

White House Considers Neutral Cost Recovery for Structures

May 6, 2020

When considering long-term policies for increasing long-run levels of investment and economic growth, full expensing and neutral cost recovery are better targeted than policies like a capital gains cut.

Reviewing the Economic and Revenue Implications of Cost Recovery Options

April 28, 2020

Permanent full expensing for all types of investment is an effective policy change lawmakers can use to encourage additional investment and economic growth.

Reviewing the Benefits of Full Expensing for the Post-Pandemic Economic Recovery

April 27, 2020

One of the most cost-effective policy changes would be to make full expensing of machinery and equipment permanent and extend this important tax treatment to structures as well as for firms in a net operating loss position.

Tax Policy After Coronavirus: Clearing a Path to Economic Recovery

April 22, 2020

Governments at all levels must work to remove the tax policy barriers that stand in the way of economic recovery and long-term prosperity following the COVID-19 crisis. Our new guide outlines several comprehensive options that policymakers can take at the federal and state levels.

Tax Policy to Bridge the Coronavirus-Induced Economic Slowdown

March 18, 2020

Tax policy can help by giving businesses current access to future tax “assets”—deductions and credits the businesses will be allowed or owed over time any way under current law—instead of making them wait.

Toomey Introduces Legislation to Make Bonus Depreciation Permanent and Fix the Retail Glitch

February 14, 2020

Making 100 percent bonus depreciation permanent avoids the uncertainty associated with the phaseout of a powerful pro-growth policy and would provide a cost-effective boost to long-run economic output, wages, and employment in the United States.

Depreciation Requires Businesses to Pay Tax on Income That Doesn’t Exist

May 21, 2019

While tax rates matter to businesses, so too does the measure of income to which those tax rates apply. The corporate income tax is a tax on profits, normally defined as revenue minus costs. However, under the current tax code, businesses are unable to deduct the full cost of certain expenses—their capital investments—meaning the tax code is not neutral and actually increases the cost of investment.

Details and Analysis of The CREATE JOBS Act

July 30, 2020

Senators Ted Cruz and Martha McSally introduced the CREATE JOBS Act that would make two significant changes to incentivize investment in the United States.

Three-Fourths of New 2016 Investment Was Excluded from Improved Cost Recovery

July 28, 2020

New data sheds light on what share of new business investment was eligible for bonus depreciation as it existed before 2017 tax reform, and what share of new investment was excluded from improved cost recovery. This matters because the income tax is biased against investment in capital assets to the extent that it makes the investor wait years or decades to claim the cost of machines, equipment, or factories on their tax returns.

1980s Tax Reform, Cost Recovery, and the Real Estate Industry: Lessons for Today

July 23, 2020

The Tax Reform Act of 1986 extended depreciation schedules for both commercial and noncommercial of real estate, reducing the attractiveness of those investments.

Improved Cost Recovery Is A Wide-Ranging Policy Solution

July 10, 2020

Rather than limit improvements to certain sectors, lawmakers could pursue a broader policy of full expensing for all capital investment and neutral cost recovery for structures and clear the tax policy hurdles that currently stand in the way of private investment.

FAQ on Neutral Cost Recovery and Expensing

July 10, 2020

Cost recovery is the way the tax code permits firms to recover (or deduct) the cost of making investments. Cost recovery plays an important role in defining a business’ taxable income and can impact investment decisions.

Neutral Cost Recovery Is Not a New Idea

May 19, 2020

As stated by Rep. Jack Kemp in 1985, “Neutral cost recovery is designed to provide the present value of investment expensing without some of its practical problems.”

Options for Improving the Tax Treatment of Structures

May 19, 2020

Improving the tax treatment of structures is one of the most cost-effective tax policy changes available to lawmakers as they consider how to remove investment barriers in the tax code to hasten the economic recovery. Policymakers must weigh the trade-offs among long-run economic output goals, revenue constraints, and the existing stock of structures.

White House Considers Neutral Cost Recovery for Structures

May 6, 2020

When considering long-term policies for increasing long-run levels of investment and economic growth, full expensing and neutral cost recovery are better targeted than policies like a capital gains cut.

Reviewing the Economic and Revenue Implications of Cost Recovery Options

April 28, 2020

Permanent full expensing for all types of investment is an effective policy change lawmakers can use to encourage additional investment and economic growth.

Economic and Budgetary Impact of Extending Full Expensing to Structures

January 7, 2020

Full expensing is one of the most powerful pro-growth policies in terms of revenue forgone. Given that structures comprise a large share of the private capital stock, improving their tax treatment would end a large bias against investment in the tax code.

Estimating Neutral Cost Recovery’s Impact on Affordable Housing

August 7, 2020

Housing affordability was a major issue even before the COVID-19 crisis, but the current economic situation has made it more salient. Immediate support for people struggling makes sense now, but lawmakers should also consider long-term solutions to the problem of high rents, namely by expanding the supply of housing.

Three-Fourths of New 2016 Investment Was Excluded from Improved Cost Recovery

July 28, 2020

New data sheds light on what share of new business investment was eligible for bonus depreciation as it existed before 2017 tax reform, and what share of new investment was excluded from improved cost recovery. This matters because the income tax is biased against investment in capital assets to the extent that it makes the investor wait years or decades to claim the cost of machines, equipment, or factories on their tax returns.

1980s Tax Reform, Cost Recovery, and the Real Estate Industry: Lessons for Today

July 23, 2020

The Tax Reform Act of 1986 extended depreciation schedules for both commercial and noncommercial of real estate, reducing the attractiveness of those investments.

Attracting Manufacturing to the U.S. Should Start with Neutral Tax Treatment, Not Subsidies

July 13, 2020

Before considering industry-specific laws and subsidies for onshoring, policymakers should make sure the U.S. tax code is not biased against domestic investment in the first place.

Improved Cost Recovery Is A Wide-Ranging Policy Solution

July 10, 2020

Rather than limit improvements to certain sectors, lawmakers could pursue a broader policy of full expensing for all capital investment and neutral cost recovery for structures and clear the tax policy hurdles that currently stand in the way of private investment.

FAQ on Neutral Cost Recovery and Expensing

July 10, 2020

Cost recovery is the way the tax code permits firms to recover (or deduct) the cost of making investments. Cost recovery plays an important role in defining a business’ taxable income and can impact investment decisions.

Inefficiencies Created by the Tax System’s Dependence on Economic Depreciation

June 12, 2020

One idea that would help the nation’s economic recovery during the coronavirus crisis would be moving to full expensing of capital investment. The depreciation debate might seem confusing, so the question at hand is: how, when, and by what amount can businesses recognize (or recover) the cost of a capital investment, like a piece of equipment or a new warehouse, on their income tax return?

Neutral Cost Recovery Is Not a New Idea

May 19, 2020

As stated by Rep. Jack Kemp in 1985, “Neutral cost recovery is designed to provide the present value of investment expensing without some of its practical problems.”

White House Considers Neutral Cost Recovery for Structures

May 6, 2020

When considering long-term policies for increasing long-run levels of investment and economic growth, full expensing and neutral cost recovery are better targeted than policies like a capital gains cut.

Reviewing the Economic and Revenue Implications of Cost Recovery Options

April 28, 2020

Permanent full expensing for all types of investment is an effective policy change lawmakers can use to encourage additional investment and economic growth.

Tax Policy After Coronavirus: Clearing a Path to Economic Recovery

April 22, 2020

Governments at all levels must work to remove the tax policy barriers that stand in the way of economic recovery and long-term prosperity following the COVID-19 crisis. Our new guide outlines several comprehensive options that policymakers can take at the federal and state levels.

Improved Cost Recovery Is A Wide-Ranging Policy Solution

July 10, 2020

Rather than limit improvements to certain sectors, lawmakers could pursue a broader policy of full expensing for all capital investment and neutral cost recovery for structures and clear the tax policy hurdles that currently stand in the way of private investment.

FAQ on Neutral Cost Recovery and Expensing

July 10, 2020

Cost recovery is the way the tax code permits firms to recover (or deduct) the cost of making investments. Cost recovery plays an important role in defining a business’ taxable income and can impact investment decisions.

Estimated Impact of Improved Cost Recovery Treatment by State

June 30, 2020

We estimate that moving to permanent full expensing and neutral cost recovery for structures would add more than 1 million full-time equivalent jobs to the long-run economy and boost the long-run capital stock by $4.8 trillion.

Full Expensing is Good for the Short Run and the Long Run

June 18, 2020

In the first year of enactment alone, we estimate the combination of full expensing and neutral cost recovery would increase full-time equivalent employment by more than 44,000 jobs. The cumulative impact by year five of the policy would be nearly 200,000 new jobs.

Reviewing the Benefits of Full Expensing for the Post-Pandemic Economic Recovery

April 27, 2020

One of the most cost-effective policy changes would be to make full expensing of machinery and equipment permanent and extend this important tax treatment to structures as well as for firms in a net operating loss position.

Tax Policy After Coronavirus: Clearing a Path to Economic Recovery

April 22, 2020

Governments at all levels must work to remove the tax policy barriers that stand in the way of economic recovery and long-term prosperity following the COVID-19 crisis. Our new guide outlines several comprehensive options that policymakers can take at the federal and state levels.

Tax Policy to Bridge the Coronavirus-Induced Economic Slowdown

March 18, 2020

Tax policy can help by giving businesses current access to future tax “assets”—deductions and credits the businesses will be allowed or owed over time any way under current law—instead of making them wait.

Comparing the Growth and Income-Boosting Effects of Tax Reform Options

March 9, 2020

As policymakers evaluate changes to the tax code, such as proposals coming from presidential candidates and the White House, it will be important for them to evaluate the relative effects of various provisions. According to our analysis, making full expensing permanent would be one of the most efficient ways to increase after-tax incomes for the middle class.

Toomey Introduces Legislation to Make Bonus Depreciation Permanent and Fix the Retail Glitch

February 14, 2020

Making 100 percent bonus depreciation permanent avoids the uncertainty associated with the phaseout of a powerful pro-growth policy and would provide a cost-effective boost to long-run economic output, wages, and employment in the United States.

Biden’s Plan to Boost Research and Development Should Include Cancellation of Upcoming R&D Amortization

July 13, 2020

As concern over American competitiveness and onshoring of innovative activity increases, presidential candidates and policymakers should keep in mind the tax increases scheduled to take effect in the coming years, including the amortization of R&D and phaseout of the broader expensing provisions.

Improved Cost Recovery Is A Wide-Ranging Policy Solution

July 10, 2020

Rather than limit improvements to certain sectors, lawmakers could pursue a broader policy of full expensing for all capital investment and neutral cost recovery for structures and clear the tax policy hurdles that currently stand in the way of private investment.

Tax Policy After Coronavirus: Clearing a Path to Economic Recovery

April 22, 2020

Governments at all levels must work to remove the tax policy barriers that stand in the way of economic recovery and long-term prosperity following the COVID-19 crisis. Our new guide outlines several comprehensive options that policymakers can take at the federal and state levels.

Legislation Introduced to Cancel R&D Amortization

October 2, 2019

Canceling the amortization of research and development costs would reduce federal revenue, but policymakers have a variety of options to offset the costs.

Amortizing Research and Development Expenses Under the Tax Cuts and Jobs Act

February 5, 2019

Expensing, or the immediate write-off of R&D costs, is a valuable component of the current tax system. The TCJA’s change to amortization in 2022, requiring firms to write off their business costs over time rather than immediately, would raise the cost of investment, discourage R&D, and reduce economic output.

Economic Recovery and Deductions for Worker Training

August 13, 2020

Tax treatment can affect investment decisions. Extending expensing treatment (full and immediate deductions) to all forms of capital investment, human and physical, would help facilitate sustainable long-run economic growth.

Details and Analysis of The CREATE JOBS Act

July 30, 2020

Senators Ted Cruz and Martha McSally introduced the CREATE JOBS Act that would make two significant changes to incentivize investment in the United States.

Estimated Impact of Improved Cost Recovery Treatment by State

June 30, 2020

We estimate that moving to permanent full expensing and neutral cost recovery for structures would add more than 1 million full-time equivalent jobs to the long-run economy and boost the long-run capital stock by $4.8 trillion.

Why Neutral Cost Recovery Is Good for Workers

June 23, 2020

Studies have shown that accelerated depreciation helps increase wage growth. A recent report found that states that implemented accelerated depreciation in their tax codes led to a 2.5 percent increase in compensation per employee in manufacturing, relative to states that did not.

Full Expensing is Good for the Short Run and the Long Run

June 18, 2020

In the first year of enactment alone, we estimate the combination of full expensing and neutral cost recovery would increase full-time equivalent employment by more than 44,000 jobs. The cumulative impact by year five of the policy would be nearly 200,000 new jobs.

Empirical Evidence Shows Expensing Leads to More Investment and Higher Employment

May 19, 2020

The Tax Foundation’s General Equilibrium Model suggests that allowing businesses to immediately deduct or “expense” their capital investments in the year in which they are purchased delivers the biggest bang for the buck in spurring economic growth and jobs compared to other tax policies.

Reviewing the Economic and Revenue Implications of Cost Recovery Options

April 28, 2020

Permanent full expensing for all types of investment is an effective policy change lawmakers can use to encourage additional investment and economic growth.

Tax Policy After Coronavirus: Clearing a Path to Economic Recovery

April 22, 2020

Governments at all levels must work to remove the tax policy barriers that stand in the way of economic recovery and long-term prosperity following the COVID-19 crisis. Our new guide outlines several comprehensive options that policymakers can take at the federal and state levels.

How the CARES Act Fixed a Tax Bias Against Green Investment

August 20, 2020

One under-discussed part of the CARES Act, passed in March to provide economic relief during the COVID-19 epidemic, is a correction to a drafting error in the Tax Cuts and Jobs Act of 2017, often known as the “retail glitch.”

New Accelerated Depreciation Policies to Spur Investment in Australia, Austria, Germany, and New Zealand

August 17, 2020

In recent months, several countries have introduced accelerated depreciation as a measure to incentivize private investment, including Australia, Austria, Germany, and New Zealand. There are various ways of how this policy has been implemented in the respective countries, largely depending on the existing standard depreciation schedules.

Details and Analysis of The CREATE JOBS Act

July 30, 2020

Senators Ted Cruz and Martha McSally introduced the CREATE JOBS Act that would make two significant changes to incentivize investment in the United States.

Estimated Impact of Improved Cost Recovery Treatment by State

June 30, 2020

We estimate that moving to permanent full expensing and neutral cost recovery for structures would add more than 1 million full-time equivalent jobs to the long-run economy and boost the long-run capital stock by $4.8 trillion.

What the Internet Can Teach Us About Capital Investment, Infrastructure, and Tax Policy

June 17, 2020

The lockdowns imposed in response to the COVID-19 pandemic induced an increase in demand for broadband internet, as work from home and other social distancing measures pushed people to spend more time online. As broadband becomes a more important piece of America's infrastructure, it makes sense to look at tax policy that will help drive more investment and better service.

Empirical Evidence Shows Expensing Leads to More Investment and Higher Employment

May 19, 2020

The Tax Foundation’s General Equilibrium Model suggests that allowing businesses to immediately deduct or “expense” their capital investments in the year in which they are purchased delivers the biggest bang for the buck in spurring economic growth and jobs compared to other tax policies.

Reducing the Bias Against Long-term Investments

May 8, 2020

Other countries have shown that providing deductions in line with invested capital costs can have positive impacts both on investment and on debt bias.

Reviewing the Economic and Revenue Implications of Cost Recovery Options

April 28, 2020

Permanent full expensing for all types of investment is an effective policy change lawmakers can use to encourage additional investment and economic growth.

Tax Policy After Coronavirus: Clearing a Path to Economic Recovery

April 22, 2020

Governments at all levels must work to remove the tax policy barriers that stand in the way of economic recovery and long-term prosperity following the COVID-19 crisis. Our new guide outlines several comprehensive options that policymakers can take at the federal and state levels.

Estimating Neutral Cost Recovery’s Impact on Affordable Housing

August 7, 2020

Housing affordability was a major issue even before the COVID-19 crisis, but the current economic situation has made it more salient. Immediate support for people struggling makes sense now, but lawmakers should also consider long-term solutions to the problem of high rents, namely by expanding the supply of housing.

Did 1986 Tax Reform Hurt Affordable Housing?

July 1, 2020

Improving cost recovery for residential structures, while not a silver bullet for solving the housing crisis, would on the margin encourage more construction that would help push rents down across the board.

Improving the Tax Treatment of Residential Buildings Will Stretch Affordable Housing Assistance Dollars Further

June 25, 2020

By updating the tax code to allow developers to more fully cover their investments, construction costs will fall, which, in turn, means that federal affordable housing assistance dollars will go that much further in helping low-income tenants.

What the Internet Can Teach Us About Capital Investment, Infrastructure, and Tax Policy

June 17, 2020

The lockdowns imposed in response to the COVID-19 pandemic induced an increase in demand for broadband internet, as work from home and other social distancing measures pushed people to spend more time online. As broadband becomes a more important piece of America's infrastructure, it makes sense to look at tax policy that will help drive more investment and better service.