The Economic, Revenue, and Distributional Effects of Permanent 100 Percent Bonus Depreciation August 30, 2022 The phaseout of 100 percent bonus depreciation, scheduled to take place after the end of 2022, will increase the after-tax cost of investment in the U.S. Permanently extending it would increase long-run economic output by 0.4 percent and increase employment by 73,000 FTE jobs.
Chips Are Down in Semiconductor Tax World July 27, 2022 The Senate has begun debate on the so-called Chips bill, which would provide $52 billion in grants and $24 billion in tax credits to supposedly strengthen the production of semiconductors in the U.S.
Oklahoma Becomes First State in Nation to Make Full Expensing Permanent July 6, 2022 Gov. Stitt signed into law a pro-growth bill that will set the state apart from its peers. Other states should look to follow Oklahoma’s example and make full expensing permanent to maintain their competitiveness in an increasingly mobile economy.
Worldwide Investment at Risk as Policies Critical to Capital Investment Phase Out April 13, 2023 At a moment when countries are trying to make production more environmentally friendly and shore up supply chain weaknesses, capital investment is critical. Rather than adopt temporary policies that phase out and expire, policymakers should focus their efforts on long-term reforms to support investment.
Improving Tax Treatment of Structures Offers Commonsense Way to Boost Competitiveness March 24, 2022 The U.S. tax system is biased against capital investments. Ending these tax penalties would boost economic output, productivity, and employment.
Taxes, Tariffs, and Industrial Policy: How the U.S. Tax Code Fails Manufacturing March 17, 2022 Policymakers actively marginalized the manufacturing sector by saddling them with cost recovery rules that prevent them from deducting the full cost of investment in physical plant and equipment. Going forward, policymakers should avoid haphazard fixes, targeted measures, and protectionism.
10 Tax Reforms for Growth and Opportunity February 22, 2022 By reducing the tax code’s current barriers to investment and saving and simplifying its complex rules, lawmakers would greatly enhance the ability of Americans to pursue new ideas, create more opportunities, and build financial security for themselves and their families.
Bonus Depreciation Helps Disadvantaged Workers, Study Finds November 23, 2021 Low-skilled workers have been the hardest hit by the pandemic-induced economic slowdown. When deciding on bonus depreciation, which is currently set to expire in 2026, policymakers should remember that disadvantaged workers would be the most likely to benefit from making it permanent.
Fixing Tax Treatment of Capital Investments Could Improve Supply Chain Resiliency October 28, 2021 While taxes are not at the root of supply chain disruptions, improvements to the tax code could make supply chains more resilient in the future.
Three Reasons Why Full Cost Recovery Is Right Even if Assets Increase in Value August 5, 2021 The ideal treatment is to match the tax code to a firm’s cash flow—allow immediate deductions for all expenses, including all forms of investment, while taxing the resulting returns from the investments.
Policymakers Offer Proposals to Fix Three Upcoming Tax Changes July 1, 2021 Three upcoming tax law changes scheduled by the 2017 Tax Cuts and Jobs Act (TCJA) to help offset its revenue losses would be canceled by proposed legislation that would prevent the tax treatment of investment from worsening over the coming years.
Expensing Is Infrastructure, Too June 15, 2021 The Biden administration has suggested several tax increases for his infrastructure plan. Public infrastructure can help increase economic growth, but by raising taxes on private investment, the net effect on growth may be negative. However, tax options like retaining expensing for private R&D investment or making 100 percent bonus depreciation for equipment permanent would be complementary to the goals of infrastructure spending.
Combined Effect of a Higher Corporate Rate and Permanent Bonus Depreciation June 15, 2021 The negative effects of President Biden’s proposed 28 percent corporate income tax rate could be tempered by improving how the corporate income tax base treats investment expenses.
Reviewing Options to Raise Tax Revenue and the Trade-offs for Economic Growth and Progressivity May 3, 2021 There’s a useful contrast between two revenue options related to President Biden’s infrastructure push. The president's American Jobs Plan includes a proposal to raise the corporate tax rate to 28 percent. Meanwhile, historically, the gas tax is the main revenue source for transportation funding.
Providing Full Cost Recovery for Investment and Lowering Taxes on Firms Are Best Options for Boosting Growth April 27, 2021 As policymakers consider tax options to boost the U.S. economy’s long-run economic growth, they should consider reforms that would increase growth the most while minimizing forgone tax revenue.
Options for Reforming America’s Tax Code 2.0 April 19, 2021 To assist lawmakers in navigating the current tax reform conversations, we modeled how 70 different changes to the U.S. tax code would affect the U.S. economy, federal tax revenue, and the distribution of the tax burden.
Tax Policy Improvements Needed to Help Industries through the Semiconductor Shortage March 16, 2021 As lawmakers evaluate how to respond to the global semiconductor shortage, they should consider allowing full cost recovery across all types of capital investment—inventories, machinery and equipment, structures, and R&D.
How Expensing for Capital Investment Can Accelerate the Transition to a Cleaner Economy January 12, 2021 Expensing for capital investments is a powerful tax policy for economic growth. But expensing can also help shift the economy to a more sustainable future through increased investment in new, less carbon-intensive technology. Expensing for capital investment would eliminate a tax bias against energy efficiency improvements that reduce operating costs but involve high upfront investments. It could also serve to accelerate the existing trend of movement towards more green energy power sources.
Outlining a Path for Tax Policy Compromises December 1, 2020 While a sweeping tax policy bill is unlikely in the near future, lawmakers may be able to come together on a smaller scale. Pairing better cost recovery on a permanent basis with support for vulnerable households as well as additional pandemic-related relief would help promote a more rapid return to growth and help businesses and households weather the ongoing crisis.
Navigating the 2020 Tax Extenders in the Pandemic Economy December 1, 2020 At the end of 2020, 33 temporary tax provisions are scheduled to expire at the federal level. These provisions generally fall under four categories: cost recovery, energy, individual, and other business provisions.
Increasing the Tax Burden on Capital Investment and Automation Hurts Workers November 12, 2020 There has been an ongoing debate about how automation and the use of robots in the workplace has impacted workers’ wages and employment. Recently, MIT and Boston University economists examined whether tax policy favors certain forms of automation that puts workers at a competitive disadvantage.
Reviewing the Commitment to American GROWTH Act October 14, 2020 House Republicans recently introduced HR 11, the Commitment to American GROWTH Act, outlining an alternative to Democratic presidential nominee Joe Biden’s tax vision. The proposal would address upcoming expirations of the 2017 Tax Cuts and Jobs Act (TCJA) and create or expand other tax provisions designed to boost domestic investment.
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.
The Economic, Revenue, and Distributional Effects of Permanent 100 Percent Bonus Depreciation August 30, 2022 The phaseout of 100 percent bonus depreciation, scheduled to take place after the end of 2022, will increase the after-tax cost of investment in the U.S. Permanently extending it would increase long-run economic output by 0.4 percent and increase employment by 73,000 FTE jobs.
Chips Are Down in Semiconductor Tax World July 27, 2022 The Senate has begun debate on the so-called Chips bill, which would provide $52 billion in grants and $24 billion in tax credits to supposedly strengthen the production of semiconductors in the U.S.
Oklahoma Becomes First State in Nation to Make Full Expensing Permanent July 6, 2022 Gov. Stitt signed into law a pro-growth bill that will set the state apart from its peers. Other states should look to follow Oklahoma’s example and make full expensing permanent to maintain their competitiveness in an increasingly mobile economy.
Worldwide Investment at Risk as Policies Critical to Capital Investment Phase Out April 13, 2023 At a moment when countries are trying to make production more environmentally friendly and shore up supply chain weaknesses, capital investment is critical. Rather than adopt temporary policies that phase out and expire, policymakers should focus their efforts on long-term reforms to support investment.
Improving Tax Treatment of Structures Offers Commonsense Way to Boost Competitiveness March 24, 2022 The U.S. tax system is biased against capital investments. Ending these tax penalties would boost economic output, productivity, and employment.
Taxes, Tariffs, and Industrial Policy: How the U.S. Tax Code Fails Manufacturing March 17, 2022 Policymakers actively marginalized the manufacturing sector by saddling them with cost recovery rules that prevent them from deducting the full cost of investment in physical plant and equipment. Going forward, policymakers should avoid haphazard fixes, targeted measures, and protectionism.
10 Tax Reforms for Growth and Opportunity February 22, 2022 By reducing the tax code’s current barriers to investment and saving and simplifying its complex rules, lawmakers would greatly enhance the ability of Americans to pursue new ideas, create more opportunities, and build financial security for themselves and their families.
Bonus Depreciation Helps Disadvantaged Workers, Study Finds November 23, 2021 Low-skilled workers have been the hardest hit by the pandemic-induced economic slowdown. When deciding on bonus depreciation, which is currently set to expire in 2026, policymakers should remember that disadvantaged workers would be the most likely to benefit from making it permanent.
Fixing Tax Treatment of Capital Investments Could Improve Supply Chain Resiliency October 28, 2021 While taxes are not at the root of supply chain disruptions, improvements to the tax code could make supply chains more resilient in the future.
Three Reasons Why Full Cost Recovery Is Right Even if Assets Increase in Value August 5, 2021 The ideal treatment is to match the tax code to a firm’s cash flow—allow immediate deductions for all expenses, including all forms of investment, while taxing the resulting returns from the investments.
Policymakers Offer Proposals to Fix Three Upcoming Tax Changes July 1, 2021 Three upcoming tax law changes scheduled by the 2017 Tax Cuts and Jobs Act (TCJA) to help offset its revenue losses would be canceled by proposed legislation that would prevent the tax treatment of investment from worsening over the coming years.
Expensing Is Infrastructure, Too June 15, 2021 The Biden administration has suggested several tax increases for his infrastructure plan. Public infrastructure can help increase economic growth, but by raising taxes on private investment, the net effect on growth may be negative. However, tax options like retaining expensing for private R&D investment or making 100 percent bonus depreciation for equipment permanent would be complementary to the goals of infrastructure spending.
Combined Effect of a Higher Corporate Rate and Permanent Bonus Depreciation June 15, 2021 The negative effects of President Biden’s proposed 28 percent corporate income tax rate could be tempered by improving how the corporate income tax base treats investment expenses.
Reviewing Options to Raise Tax Revenue and the Trade-offs for Economic Growth and Progressivity May 3, 2021 There’s a useful contrast between two revenue options related to President Biden’s infrastructure push. The president's American Jobs Plan includes a proposal to raise the corporate tax rate to 28 percent. Meanwhile, historically, the gas tax is the main revenue source for transportation funding.
Providing Full Cost Recovery for Investment and Lowering Taxes on Firms Are Best Options for Boosting Growth April 27, 2021 As policymakers consider tax options to boost the U.S. economy’s long-run economic growth, they should consider reforms that would increase growth the most while minimizing forgone tax revenue.
Options for Reforming America’s Tax Code 2.0 April 19, 2021 To assist lawmakers in navigating the current tax reform conversations, we modeled how 70 different changes to the U.S. tax code would affect the U.S. economy, federal tax revenue, and the distribution of the tax burden.
Tax Policy Improvements Needed to Help Industries through the Semiconductor Shortage March 16, 2021 As lawmakers evaluate how to respond to the global semiconductor shortage, they should consider allowing full cost recovery across all types of capital investment—inventories, machinery and equipment, structures, and R&D.
How Expensing for Capital Investment Can Accelerate the Transition to a Cleaner Economy January 12, 2021 Expensing for capital investments is a powerful tax policy for economic growth. But expensing can also help shift the economy to a more sustainable future through increased investment in new, less carbon-intensive technology. Expensing for capital investment would eliminate a tax bias against energy efficiency improvements that reduce operating costs but involve high upfront investments. It could also serve to accelerate the existing trend of movement towards more green energy power sources.
Outlining a Path for Tax Policy Compromises December 1, 2020 While a sweeping tax policy bill is unlikely in the near future, lawmakers may be able to come together on a smaller scale. Pairing better cost recovery on a permanent basis with support for vulnerable households as well as additional pandemic-related relief would help promote a more rapid return to growth and help businesses and households weather the ongoing crisis.
Navigating the 2020 Tax Extenders in the Pandemic Economy December 1, 2020 At the end of 2020, 33 temporary tax provisions are scheduled to expire at the federal level. These provisions generally fall under four categories: cost recovery, energy, individual, and other business provisions.
Increasing the Tax Burden on Capital Investment and Automation Hurts Workers November 12, 2020 There has been an ongoing debate about how automation and the use of robots in the workplace has impacted workers’ wages and employment. Recently, MIT and Boston University economists examined whether tax policy favors certain forms of automation that puts workers at a competitive disadvantage.
Reviewing the Commitment to American GROWTH Act October 14, 2020 House Republicans recently introduced HR 11, the Commitment to American GROWTH Act, outlining an alternative to Democratic presidential nominee Joe Biden’s tax vision. The proposal would address upcoming expirations of the 2017 Tax Cuts and Jobs Act (TCJA) and create or expand other tax provisions designed to boost domestic investment.
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.
Chips Are Down in Semiconductor Tax World July 27, 2022 The Senate has begun debate on the so-called Chips bill, which would provide $52 billion in grants and $24 billion in tax credits to supposedly strengthen the production of semiconductors in the U.S.
Improving Tax Treatment of Structures Offers Commonsense Way to Boost Competitiveness March 24, 2022 The U.S. tax system is biased against capital investments. Ending these tax penalties would boost economic output, productivity, and employment.
Taxes, Tariffs, and Industrial Policy: How the U.S. Tax Code Fails Manufacturing March 17, 2022 Policymakers actively marginalized the manufacturing sector by saddling them with cost recovery rules that prevent them from deducting the full cost of investment in physical plant and equipment. Going forward, policymakers should avoid haphazard fixes, targeted measures, and protectionism.
10 Tax Reforms for Growth and Opportunity February 22, 2022 By reducing the tax code’s current barriers to investment and saving and simplifying its complex rules, lawmakers would greatly enhance the ability of Americans to pursue new ideas, create more opportunities, and build financial security for themselves and their families.
Expensing Is Infrastructure, Too June 15, 2021 The Biden administration has suggested several tax increases for his infrastructure plan. Public infrastructure can help increase economic growth, but by raising taxes on private investment, the net effect on growth may be negative. However, tax options like retaining expensing for private R&D investment or making 100 percent bonus depreciation for equipment permanent would be complementary to the goals of infrastructure spending.
Providing Full Cost Recovery for Investment and Lowering Taxes on Firms Are Best Options for Boosting Growth April 27, 2021 As policymakers consider tax options to boost the U.S. economy’s long-run economic growth, they should consider reforms that would increase growth the most while minimizing forgone tax revenue.
Tax Policy Improvements Needed to Help Industries through the Semiconductor Shortage March 16, 2021 As lawmakers evaluate how to respond to the global semiconductor shortage, they should consider allowing full cost recovery across all types of capital investment—inventories, machinery and equipment, structures, and R&D.
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.
Taxes, Tariffs, and Industrial Policy: How the U.S. Tax Code Fails Manufacturing March 17, 2022 Policymakers actively marginalized the manufacturing sector by saddling them with cost recovery rules that prevent them from deducting the full cost of investment in physical plant and equipment. Going forward, policymakers should avoid haphazard fixes, targeted measures, and protectionism.
10 Tax Reforms for Growth and Opportunity February 22, 2022 By reducing the tax code’s current barriers to investment and saving and simplifying its complex rules, lawmakers would greatly enhance the ability of Americans to pursue new ideas, create more opportunities, and build financial security for themselves and their families.
Policymakers Offer Proposals to Fix Three Upcoming Tax Changes July 1, 2021 Three upcoming tax law changes scheduled by the 2017 Tax Cuts and Jobs Act (TCJA) to help offset its revenue losses would be canceled by proposed legislation that would prevent the tax treatment of investment from worsening over the coming years.
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.
Chips Are Down in Semiconductor Tax World July 27, 2022 The Senate has begun debate on the so-called Chips bill, which would provide $52 billion in grants and $24 billion in tax credits to supposedly strengthen the production of semiconductors in the U.S.
Oklahoma Becomes First State in Nation to Make Full Expensing Permanent July 6, 2022 Gov. Stitt signed into law a pro-growth bill that will set the state apart from its peers. Other states should look to follow Oklahoma’s example and make full expensing permanent to maintain their competitiveness in an increasingly mobile economy.
Worldwide Investment at Risk as Policies Critical to Capital Investment Phase Out April 13, 2023 At a moment when countries are trying to make production more environmentally friendly and shore up supply chain weaknesses, capital investment is critical. Rather than adopt temporary policies that phase out and expire, policymakers should focus their efforts on long-term reforms to support investment.
Taxes, Tariffs, and Industrial Policy: How the U.S. Tax Code Fails Manufacturing March 17, 2022 Policymakers actively marginalized the manufacturing sector by saddling them with cost recovery rules that prevent them from deducting the full cost of investment in physical plant and equipment. Going forward, policymakers should avoid haphazard fixes, targeted measures, and protectionism.
10 Tax Reforms for Growth and Opportunity February 22, 2022 By reducing the tax code’s current barriers to investment and saving and simplifying its complex rules, lawmakers would greatly enhance the ability of Americans to pursue new ideas, create more opportunities, and build financial security for themselves and their families.
Bonus Depreciation Helps Disadvantaged Workers, Study Finds November 23, 2021 Low-skilled workers have been the hardest hit by the pandemic-induced economic slowdown. When deciding on bonus depreciation, which is currently set to expire in 2026, policymakers should remember that disadvantaged workers would be the most likely to benefit from making it permanent.
Three Reasons Why Full Cost Recovery Is Right Even if Assets Increase in Value August 5, 2021 The ideal treatment is to match the tax code to a firm’s cash flow—allow immediate deductions for all expenses, including all forms of investment, while taxing the resulting returns from the investments.
Policymakers Offer Proposals to Fix Three Upcoming Tax Changes July 1, 2021 Three upcoming tax law changes scheduled by the 2017 Tax Cuts and Jobs Act (TCJA) to help offset its revenue losses would be canceled by proposed legislation that would prevent the tax treatment of investment from worsening over the coming years.
Expensing Is Infrastructure, Too June 15, 2021 The Biden administration has suggested several tax increases for his infrastructure plan. Public infrastructure can help increase economic growth, but by raising taxes on private investment, the net effect on growth may be negative. However, tax options like retaining expensing for private R&D investment or making 100 percent bonus depreciation for equipment permanent would be complementary to the goals of infrastructure spending.
Combined Effect of a Higher Corporate Rate and Permanent Bonus Depreciation June 15, 2021 The negative effects of President Biden’s proposed 28 percent corporate income tax rate could be tempered by improving how the corporate income tax base treats investment expenses.
Providing Full Cost Recovery for Investment and Lowering Taxes on Firms Are Best Options for Boosting Growth April 27, 2021 As policymakers consider tax options to boost the U.S. economy’s long-run economic growth, they should consider reforms that would increase growth the most while minimizing forgone tax revenue.
Tax Policy Improvements Needed to Help Industries through the Semiconductor Shortage March 16, 2021 As lawmakers evaluate how to respond to the global semiconductor shortage, they should consider allowing full cost recovery across all types of capital investment—inventories, machinery and equipment, structures, and R&D.
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.
Chips Are Down in Semiconductor Tax World July 27, 2022 The Senate has begun debate on the so-called Chips bill, which would provide $52 billion in grants and $24 billion in tax credits to supposedly strengthen the production of semiconductors in the U.S.
Taxes, Tariffs, and Industrial Policy: How the U.S. Tax Code Fails Manufacturing March 17, 2022 Policymakers actively marginalized the manufacturing sector by saddling them with cost recovery rules that prevent them from deducting the full cost of investment in physical plant and equipment. Going forward, policymakers should avoid haphazard fixes, targeted measures, and protectionism.
10 Tax Reforms for Growth and Opportunity February 22, 2022 By reducing the tax code’s current barriers to investment and saving and simplifying its complex rules, lawmakers would greatly enhance the ability of Americans to pursue new ideas, create more opportunities, and build financial security for themselves and their families.
Bonus Depreciation Helps Disadvantaged Workers, Study Finds November 23, 2021 Low-skilled workers have been the hardest hit by the pandemic-induced economic slowdown. When deciding on bonus depreciation, which is currently set to expire in 2026, policymakers should remember that disadvantaged workers would be the most likely to benefit from making it permanent.
Providing Full Cost Recovery for Investment and Lowering Taxes on Firms Are Best Options for Boosting Growth April 27, 2021 As policymakers consider tax options to boost the U.S. economy’s long-run economic growth, they should consider reforms that would increase growth the most while minimizing forgone tax revenue.
Tax Policy Improvements Needed to Help Industries through the Semiconductor Shortage March 16, 2021 As lawmakers evaluate how to respond to the global semiconductor shortage, they should consider allowing full cost recovery across all types of capital investment—inventories, machinery and equipment, structures, and R&D.
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.
The Economic, Revenue, and Distributional Effects of Permanent 100 Percent Bonus Depreciation August 30, 2022 The phaseout of 100 percent bonus depreciation, scheduled to take place after the end of 2022, will increase the after-tax cost of investment in the U.S. Permanently extending it would increase long-run economic output by 0.4 percent and increase employment by 73,000 FTE jobs.
Worldwide Investment at Risk as Policies Critical to Capital Investment Phase Out April 13, 2023 At a moment when countries are trying to make production more environmentally friendly and shore up supply chain weaknesses, capital investment is critical. Rather than adopt temporary policies that phase out and expire, policymakers should focus their efforts on long-term reforms to support investment.
Improving Tax Treatment of Structures Offers Commonsense Way to Boost Competitiveness March 24, 2022 The U.S. tax system is biased against capital investments. Ending these tax penalties would boost economic output, productivity, and employment.
Taxes, Tariffs, and Industrial Policy: How the U.S. Tax Code Fails Manufacturing March 17, 2022 Policymakers actively marginalized the manufacturing sector by saddling them with cost recovery rules that prevent them from deducting the full cost of investment in physical plant and equipment. Going forward, policymakers should avoid haphazard fixes, targeted measures, and protectionism.
10 Tax Reforms for Growth and Opportunity February 22, 2022 By reducing the tax code’s current barriers to investment and saving and simplifying its complex rules, lawmakers would greatly enhance the ability of Americans to pursue new ideas, create more opportunities, and build financial security for themselves and their families.
Bonus Depreciation Helps Disadvantaged Workers, Study Finds November 23, 2021 Low-skilled workers have been the hardest hit by the pandemic-induced economic slowdown. When deciding on bonus depreciation, which is currently set to expire in 2026, policymakers should remember that disadvantaged workers would be the most likely to benefit from making it permanent.
Providing Full Cost Recovery for Investment and Lowering Taxes on Firms Are Best Options for Boosting Growth April 27, 2021 As policymakers consider tax options to boost the U.S. economy’s long-run economic growth, they should consider reforms that would increase growth the most while minimizing forgone tax revenue.
Tax Policy Improvements Needed to Help Industries through the Semiconductor Shortage March 16, 2021 As lawmakers evaluate how to respond to the global semiconductor shortage, they should consider allowing full cost recovery across all types of capital investment—inventories, machinery and equipment, structures, and R&D.
How Expensing for Capital Investment Can Accelerate the Transition to a Cleaner Economy January 12, 2021 Expensing for capital investments is a powerful tax policy for economic growth. But expensing can also help shift the economy to a more sustainable future through increased investment in new, less carbon-intensive technology. Expensing for capital investment would eliminate a tax bias against energy efficiency improvements that reduce operating costs but involve high upfront investments. It could also serve to accelerate the existing trend of movement towards more green energy power sources.
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.
The Economic, Revenue, and Distributional Effects of Permanent 100 Percent Bonus Depreciation August 30, 2022 The phaseout of 100 percent bonus depreciation, scheduled to take place after the end of 2022, will increase the after-tax cost of investment in the U.S. Permanently extending it would increase long-run economic output by 0.4 percent and increase employment by 73,000 FTE jobs.
Chips Are Down in Semiconductor Tax World July 27, 2022 The Senate has begun debate on the so-called Chips bill, which would provide $52 billion in grants and $24 billion in tax credits to supposedly strengthen the production of semiconductors in the U.S.
Worldwide Investment at Risk as Policies Critical to Capital Investment Phase Out April 13, 2023 At a moment when countries are trying to make production more environmentally friendly and shore up supply chain weaknesses, capital investment is critical. Rather than adopt temporary policies that phase out and expire, policymakers should focus their efforts on long-term reforms to support investment.
Improving Tax Treatment of Structures Offers Commonsense Way to Boost Competitiveness March 24, 2022 The U.S. tax system is biased against capital investments. Ending these tax penalties would boost economic output, productivity, and employment.
Taxes, Tariffs, and Industrial Policy: How the U.S. Tax Code Fails Manufacturing March 17, 2022 Policymakers actively marginalized the manufacturing sector by saddling them with cost recovery rules that prevent them from deducting the full cost of investment in physical plant and equipment. Going forward, policymakers should avoid haphazard fixes, targeted measures, and protectionism.
10 Tax Reforms for Growth and Opportunity February 22, 2022 By reducing the tax code’s current barriers to investment and saving and simplifying its complex rules, lawmakers would greatly enhance the ability of Americans to pursue new ideas, create more opportunities, and build financial security for themselves and their families.
Providing Full Cost Recovery for Investment and Lowering Taxes on Firms Are Best Options for Boosting Growth April 27, 2021 As policymakers consider tax options to boost the U.S. economy’s long-run economic growth, they should consider reforms that would increase growth the most while minimizing forgone tax revenue.
Tax Policy Improvements Needed to Help Industries through the Semiconductor Shortage March 16, 2021 As lawmakers evaluate how to respond to the global semiconductor shortage, they should consider allowing full cost recovery across all types of capital investment—inventories, machinery and equipment, structures, and R&D.
How Expensing for Capital Investment Can Accelerate the Transition to a Cleaner Economy January 12, 2021 Expensing for capital investments is a powerful tax policy for economic growth. But expensing can also help shift the economy to a more sustainable future through increased investment in new, less carbon-intensive technology. Expensing for capital investment would eliminate a tax bias against energy efficiency improvements that reduce operating costs but involve high upfront investments. It could also serve to accelerate the existing trend of movement towards more green energy power sources.
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.
Improving Tax Treatment of Structures Offers Commonsense Way to Boost Competitiveness March 24, 2022 The U.S. tax system is biased against capital investments. Ending these tax penalties would boost economic output, productivity, and employment.
10 Tax Reforms for Growth and Opportunity February 22, 2022 By reducing the tax code’s current barriers to investment and saving and simplifying its complex rules, lawmakers would greatly enhance the ability of Americans to pursue new ideas, create more opportunities, and build financial security for themselves and their families.
Bonus Depreciation Helps Disadvantaged Workers, Study Finds November 23, 2021 Low-skilled workers have been the hardest hit by the pandemic-induced economic slowdown. When deciding on bonus depreciation, which is currently set to expire in 2026, policymakers should remember that disadvantaged workers would be the most likely to benefit from making it permanent.
Fixing Tax Treatment of Capital Investments Could Improve Supply Chain Resiliency October 28, 2021 While taxes are not at the root of supply chain disruptions, improvements to the tax code could make supply chains more resilient in the future.
Expensing Is Infrastructure, Too June 15, 2021 The Biden administration has suggested several tax increases for his infrastructure plan. Public infrastructure can help increase economic growth, but by raising taxes on private investment, the net effect on growth may be negative. However, tax options like retaining expensing for private R&D investment or making 100 percent bonus depreciation for equipment permanent would be complementary to the goals of infrastructure spending.
Tax Policy Improvements Needed to Help Industries through the Semiconductor Shortage March 16, 2021 As lawmakers evaluate how to respond to the global semiconductor shortage, they should consider allowing full cost recovery across all types of capital investment—inventories, machinery and equipment, structures, and R&D.
How Expensing for Capital Investment Can Accelerate the Transition to a Cleaner Economy January 12, 2021 Expensing for capital investments is a powerful tax policy for economic growth. But expensing can also help shift the economy to a more sustainable future through increased investment in new, less carbon-intensive technology. Expensing for capital investment would eliminate a tax bias against energy efficiency improvements that reduce operating costs but involve high upfront investments. It could also serve to accelerate the existing trend of movement towards more green energy power sources.
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.
