THE ACCELERATOR for March 6, 2017
News for Driving Economic Growth
ECONOMIC IMPACT OF REPEAL OF ACCELERATED DEPRECIATION (MACRS) IN TAX REFORM
"As businesses adjust downward their level of investment in response to the increase in the user cost of capital (e.g., repeal of MACRS), the capital stock would begin to erode contributing to lower economic growth and lower output. Increases in cost of capital resulting from MACRS repeal creates incentives that reduce investment and dampen future economic growth."
-- Quantria Strategies, “Cost of Capital, Investment Decisions and Economic Growth: Implications for Tax Reform”
ABRUPT SHOCK TO BUSINESS
“The proposed 2014 tax reform act not only included the repeal of MACRS, but also assumed the expiration of bonus depreciation. Such a combined shift in tax rules would represent an extraordinarily abrupt change in U.S. tax policy. Without MACRS and bonus depreciation, first-year depreciation allowances for typical types of business and factory equipment would plummet from approximately 60 percent of cost to less than 10 percent. The result would be for Congress to send an unmistakable message to businesses that domestic investment is no longer a priority. For Congress to takes steps to diminish incentives for domestic investment in the name of tax reform would be to stand sound tax policy on its head.”
-- CRANE Coalition, “Congress Should Preserve and Enhance Accelerated Depreciation in Tax Reform”
ITIF ON PRO-GROWTH CORPORATE TAX REFORM
The Information Technology & Innovation Foundation rates the preservation or enhancement of a robust system of cost recovery as key to pro-growth tax reform.
-- Information Technology & Innovation Foundation, "Five Must-Haves (and Five Nice-to-Haves) for Pro-Growth Corporate Tax Reform" (See pp. 5-6 for enhanced depreciation.)
TAX REFORM GUIDANCE COMING FROM THE WHITE HOUSE?
President Trump addressed a joint session of Congress last week and said his economic team is developing "historic tax reform," although he stopped short of providing details or endorsing any particular plan. The tax reform debate so far has largely centered on the border adjustment issue, with White House advisors reportedly split on the concept.
PAY-AS-YOU-GO SLIPS BY UNDER THE RADAR
Few observers have focused on the pay-as-you-go rules that would trigger automatic spending cuts after passage of a deficit-increasing tax bill (or direct spending bill). Congress made the rules a permanent part of the law in 2010. Under the rules, a deficit-increasing tax cut would trigger broad cuts in both defense and non-defense spending.
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.