Director of Federal Tax Policy
The House is expected to vote this week on a Ways and Means Committee bill that reinstates and makes permanent a tax provision known as “bonus depreciation,” which lets businesses take bigger upfront tax deductions for certain new purchases such as machinery and equipment. The Ways and Means Committee bill is economically unjustified and fiscally irresponsible. The Joint Tax Committee estimates the measure would cost the Treasury $276 billion in forgone revenues over ten years, adding to deficits and debt.
In April, the Ways and Means Committee began to consider a series of mostly business “tax extenders” — so named because Congress routinely extends them for a year or two at a time. The cost of all the business tax cuts that Ways and Means has adopted, including bonus depreciation, now totals $581 billion, and includes not only extensions of tax provisions that have been routinely extended, but also generous expansions of some of those provisions. That’s enough to wipe out three-quarters of the $770 billion in revenue raised by the high-income provisions of the 2012 “fiscal cliff” legislation.
The full House has already passed a number of these Ways and Means bills. Members shouldn’t add the bonus depreciation bill to that list. In addition to the bill’s cost, there are other compelling reasons why policymakers should not reinstate bonus depreciation and make the policy permanent: