THE ACCELERATOR for February 21, 2017
News for Driving Economic Growth
Introducing THE ACCELERATOR, the voice of the CRANE Coalition – Cost Recovery Advances theNation’s Economy. CRANE is working to ensure that any tax reform measure preserves or advances the 60-year trend in U.S. tax policy toward rapid recovery of the cost of investment in domestic business assets. The current system of rapid cost recovery – known as “MACRS” (the modified Accelerated Cost Recovery System) or “accelerated depreciation” – helps drive domestic investment. Domestic investment drives economic growth and rising living standards.
CRANE APPLAUDS TURNABOUT IN HOUSE VIEW OF COST RECOVERY!
Just three years ago, tax writers in Congress sought to cut back accelerated depreciation as part of tax reform. But economic models both on and off Capitol Hill showed that such cutbacks would tend to dampen future economic growth, not enhance it. This year, the tax reform “Blueprint” formulated by House Speaker Ryan, Ways and Means chair Brady, and other House tax writers goes in precisely the opposite direction by proposing full and immediate expensing of domestic capital investment. The Blueprint cites research showing the substantial boost in economic growth possible from more-rapid cost recovery. CRANE strongly applauds the change in view among House tax writers. The Blueprint recognizes the role of a robust system of cost recovery in the U.S. tax system. Rapid cost recovery works by reducing the cost of capital for domestic investment and thus boosting investment and growth.
See the Blueprint Here. (See pp. 33-34 for a discussion of the economics of cost recovery).
DON’T SHIFT INTO REVERSE
Future revenues for the government from the repeal of accelerated depreciation, as a revenue offset for permanent tax reforms, would decline rapidly after an initial spurt, according to a study by former economists with the Joint Committee on Taxation. Reliance on such a repeal provision in tax reform would lead to long-term revenue shortfalls – and resulting budget pressure to reverse the tax reforms.
-- Quantria Strategies, “Long-Run Revenue Effects of Changes in Cost Recovery Allowances”
TRUMP TAX PLAN AHEAD?
President Trump says he'll announce a tax plan of his own in 2-3 weeks. He says the plan will be "lowering the overall tax burden on American businesses." Newly-confirmed Treasury Secretary Steven Mnuchin will likely spend his first few weeks on the job forming a team and analyzing tax reform options. No word yet on what the President's plan will have in common with the House GOP Blueprint.
FARMERS GRAB PITCHFORKS IN SEEKING RAPID COST RECOVERY AT STATE LEVEL
The Farm Bureau will work with legislators to permanently couple the Iowa tax code with federal tax code section 179, which allows businesses to immediately expense $500,000 of investments in domestic business assets each year. The federal government made section 179 permanent in 2015. ’We are in the third year of a struggling farm economy, and farmers are urging lawmakers not to take this important economic tool away from them.’”
CRANE is made up of American companies and associations focused on preserving a robust system of cost recovery in the tax code to ensure that businesses have the capital needed to continue driving economic growth and job creation here at home. CRANE has sponsored research on the economics and budgetary aspects of cutbacks in cost recovery. As Congress and the administration endeavor to reform the U.S. tax code in the coming months, CRANE will continue to urge the preservation and enhancement of accelerated depreciation. Follow us on Twitter.