by Kyle Pomerleau
February 06, 2014
This year, tax reform and, in particular, lowering the corporate income tax will continue to be a topic of discussion. Proposals may look to lengthen asset lives, which would reduce the amount businesses can deduct from their taxable income for capital investments as a trade for a lower corporate tax rate. While it is important for lawmakers to lower the United States’ corporate income tax rate, plans that would swap a lower statutory tax rate for longer asset lives risk harming investment in the U.S. economy. The recent experience of the United Kingdom in highlights these risks. Even though they lowered their corporate income tax rate substantially, the offsetting lengthening of asset lives reduced or eliminated the benefit of the cut and likely contributed to the decline of its manufacturing industry.