THE ACCELERATOR for December 7th, 2017

News for Driving Economic Growth





Last week the Senate passed its version of tax reform, following House passage of a similar measure the week before. Although the two bills vary in some details, both bills share the critically important feature of preserving and enhancing the tax code’s current system of cost recovery for domestic investment in business equipment and machinery.


*            The bills continue the 60-year trend in the tax code toward more-rapid cost recovery by extending and enhancing the system of bonus depreciation and by preserving MACRS – the modified accelerated cost recovery system. 


*            Rapid recovery of capital costs through bonus depreciation and MACRS will sow the seeds for future economic growth and higher living standards by stimulating an increase in the country’s stock of capital goods – goods that will contribute to national income in the future. Rapid cost recovery boosts capital spending by effectively cutting its after-tax cost. 


*            Purchases of new equipment and machinery by businesses will mean workplace modernization. Workplace modernization is the means by which workers can acquire the tools they need to increase productivity and, ultimately, wages.  


*            The enhancement of bonus depreciation in both the Senate and House bills applies only to new investment. The provisions would not provide a windfall benefit for investment decisions made in the past.


*            Bonus depreciation and MACRS have long enjoyed strong bipartisan support.  


Although the details of enhanced bonus depreciation in the Senate bill differ in some ways from the companion provision in the House bill, either version would meet the goal of holding down the cost of capital for domestic investment. The core of both versions is a five-year extension of bonus depreciation at the 100% rate – a provision that CRANE members are confident will serve as a powerful incentive for businesses to invest domestically in the newest and most modern equipment and machinery.


Certainly, permanent depreciation rules would be in keeping with traditional concepts of tax policymaking, but CRANE members recognize that although MACRS is a permanent fixture of the tax code, Congress has never enacted bonus depreciation other than for a temporary period. The five-year extension is consistent with that history.




THE ACCELERATOR is the voice of the CRANE Coalition – Cost Recovery Advances the Nation’s Economy.  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.