Expensing Is Key in Any Pro ‐​Growth Tax Package

Adam N. MichelAs Congress searches for policies to meet our current economic challenges, maintaining full expensing —which has begun to phase out—should be top of the list. Full expensing protects business investment from the costs of inflation and supports economic growth by reducing barriers to new investments.Expensing (also called 100 percent bonus depreciation) allows businesses to deduct the full cost of new investments in the year they are made. Without expensing, investment costs must be deducted over time. For example, if a farmer buys a new combine and can only use one-fifth of what he paid to offset revenues this year, he will have artificially high profits and thus pay higher taxes. The higher taxes will cut into his ability to make other investments in his farm. Expensing makes it easier to invest in new equipment.Workers of all types benefit from investments in tools, buildings, and research that allow us to produce new goods and services and earn higher incomes for our work. By lowering the cost of new investments made in the United States, expensing is a powerful incentive to boost wages and create jobs. It also removes unnecessary tax barriers for firms trying to re-shore supply chains and increase domestic manufacturing.What is expensing?Businesses pay income taxes on their profits: revenues minus costs. Expenses such as employee salaries, power bills, and rent are all deductible in the year they are paid. And until 2022, research expenses had been fully...
Source: Cato-at-liberty - Category: American Health Authors: Source Type: blogs