100 Percent Bonus Depreciation (Full Expensing)

State Tax Reform and Relief Enacted in 2022

Among the 46 states that held legislative sessions this year, structural state tax reform and temporary tax relief measures were recurring themes.

Oklahoma Becomes First State in Nation to Make Full Expensing Permanent

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.

Carbon Taxes and the Future of Green Tax Reform

Our new analysis reviews the basic structure of carbon taxes, how they compare to the existing set of climate policies, and how they could fit into various pro-growth tax reform packages.

Capital Cost Recovery across the OECD, 2022

The ongoing economic uncertainty from the COVID-19 pandemic, supply chain disruptions, and current inflationary pressures have highlighted the importance of investment.

Improving Tax Treatment of Structures Offers Commonsense Way to Boost Competitiveness

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

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

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.

Taxes, Fiscal Policy, and Inflation

Consumer prices rose by 7 percent in 2021, the highest annual rate of inflation since 1982. Where did this inflation come from and what might its impacts be? Tax and fiscal policy offer important clues.

Bonus Depreciation Helps Disadvantaged Workers, Study Finds

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

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.

How Biden’s Tax Plans Could Negatively Impact Housing

While President Biden has many proposals aimed at increasing the supply of affordable housing, including tax credits, his plans to raise business taxes could hinder that goal.

Tax Treatment of Nuclear Energy Should Be Simplified, Neutral, with Renewable Energy Sources

Tackling climate change and shifting the economy towards renewable energy has been a key part of the Biden administration’s agenda. However, this effort must first confront an overly complicated and non-neutral tax code, particularly in how it treats nuclear energy, for the White House to reach its ambitious goals.

Three Reasons Why Full Cost Recovery Is Right Even if Assets Increase in Value

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.

Tax Expenditure

Policymakers Offer Proposals to Fix Three Upcoming Tax Changes

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.

U.S. Corporate Tax Expenditures and Effective Tax Rates in Line with OECD Peers

Last week, an analysis by Reuters suggested that U.S. firms pay less income tax than foreign competitors, in part because “the U.S. tax code is unusually generous with tax breaks and deductions,” also known as corporate tax expenditures. However, the Reuters analysis is at odds with other data and studies indicating that U.S. corporate tax expenditures and effective tax rates are about on par with those in peer countries in the OECD.

How the Tax Code Handles Inflation (and How It Doesn’t)

While parts of the U.S. tax code can handle inflation, full expensing of capital investment would be a major improvement along these lines.

Expensing Is Infrastructure, Too

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

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.

Two Important Issues that Must Be Resolved in “Global Tax Reform”

If the U.S. is suggesting a 15 percent effective rate as the minimum acceptable rate for a global agreement, then the tax bases of the various minimum taxes adopted as part of the agreement should be aligned to minimize complexities and unintended consequences.