Studies show that when bonus depreciation is available, businesses respond by investing in more equipment and increasing employment, as they need more workers to operate the new equipment.
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.
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As the Biden administration turns toward infrastructure, Sen. Ron Wyden (D-Or.) has suggested including reforms to the way the tax code subsidizes energy production in such a package, eliminating 44 “tax breaks” for various activities in the energy sector and replacing them with only three.
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The UK’s Chancellor of the Exchequer Rishi Sunak released the 2021 budget, and most important for near-term growth is the significant boost to capital allowances.
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While the UK is looking at ways to raise tax revenue to cover the revenue shortfalls and additional spending resulting from the COVID-19 pandemic, short- as well as long-term, investment will be crucial in getting the economy back on track and ensuring economic growth.
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President Biden and congressional policymakers have proposed several changes to the corporate income tax, including raising the rate from 21 percent to 28 percent and imposing a 15 percent minimum tax on the book income of large corporations, to raise revenue for new spending programs. Our new modeling analyzes the economic, revenue, and distributional impact of these proposals.
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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.
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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.
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President Biden and Congress should concentrate on areas of common ground, finding incremental places to improve the tax code. A bipartisan bill recently introduced to help retirement savings is a good model for what incremental reform may look like.
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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.
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The design and implementation of a global minimum tax is not simple and straightforward. There are dozens of challenging issues that policymakers will need to consider. So, when it comes to the way the minimum tax treats new investment, it seems clear that incorporating full expensing into the design would have significant benefits.
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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.
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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.”
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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.
5 min readTax 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.
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Senators Ted Cruz and Martha McSally introduced the CREATE JOBS Act that would make two significant changes to incentivize investment in the United States.
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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.
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