As sound economic and fiscal policy that has enjoyed bipartisan support for decades, the role accelerated depreciation plays in driving economic growth and job creation has been the object of numerous studies, reports and commentaries. Some examples of that research is below. Continue to watch this page for new research showing how accelerated depreciation is still vital for a strong American economy today:
QUANTRIA STRATEGIES: Cost of Capital, Investment Decisions and Economic Growth: Implications for 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."
Business Income Bipartisan Tax Working Group Report to the U.S. Senate Finance Committee
"Thus, there are some concerns that offsetting reductions in the corporate tax rate by changing cost recovery allowances could have the net effect of decreasing investment and economic growth, depending on the policies adopted. For example, according to JCT’s analysis of the plan, the cumulative effects of the repeal of MACRS and certain amortization provisions in the Camp proposal outweigh the positive incentives from reduced rates over time. Given the uncertainty surrounding these trade-offs, the working group urges the committee to carefully consider the interaction of slowed depreciation and lowered tax rates when evaluating any comprehensive tax reform plan."
QUANTRIA STRATEGIES: Long-Run Revenue Effects of Changes in Cost Recovery Allowances
“Offsetting the cost of tax reform with a temporary timing change of receipts is imprudent tax policy. Because of the front-loaded nature of the depreciation allowance, a tax reform measure that relies on cuts in accelerated depreciation as a long-term revenue offset would have the effect of increasing future budget deficits. Those deficits would force the government to consider budgetary changes in the future – including the possible restoration of higher tax rates. Capital intensive businesses that invest in domestic plant and equipment could thus face the permanent loss of accelerated depreciation without the benefit of reduced tax rates.”
AMERICAN ENTERPRISE INSTITUTE: The Quickest Way to Wreck Corporate Tax Reform
"Depreciation deductions allow companies to write off their investment costs over a period of years. That may sound like an obscure accounting issue, but it’s of vital economic importance. Even as the corporate tax soaks up part of the investment payoffs, depreciation deductions offer tax relief to cover part of companies’ investment costs. And, because a dollar today is worth more than a dollar tomorrow, faster depreciation deductions mean bigger tax relief for investments."
AMERICAN COUNCIL FOR CAPITAL FORMATION: “Beware Tax Reform that Raises Taxes on Capital” (WSJ op-ed)
"Investment, growth and job creation should be the cornerstones of any tax-reform effort. Cash flow matters to those companies that are restoring the country's economic prosperity, particularly in the capital-intensive energy sector. The preservation of tax provisions that are working, in short, is just as important as repairing those that are not."
CFO MAGAZINE: Dark Skies Threaten Capital-Investment Returns
"A potential change in tax rules governing the depreciation of physical assets would not generate the additional corporate tax revenue the move would be designed to stimulate, according to a report from the Tax Foundation, a Washington, D.C.-based think tank. In fact, the report claims, the change would effectively reduce tax revenues by $6.4 billion, cause the loss of 68,000 jobs, pare hourly wages by 0.3 percent and reduce gross domestic product by $59 billion, or 0.4 percent."