Comparing the Growth and Revenue Effects of Four Proposed Depreciation Systems: Baucus, Camp, Wyden, and Full Expensing
by Michael Schuyler
June 12, 2014
Many tax reductions would help the economy, but a shortening of cost recovery periods is one of the few that would pay for itself from the perspective of the U.S. Treasury. Three others are cutting the corporate tax rate, which is now higher than that in any other developed nation, lowering the tax rate on capital gains and dividends, and reducing or eliminating the estate tax. A common feature of these reforms is that they focus on investment, which is vital in modern production and responds powerfully to expected after-tax returns. Because faster write-offs would be self-financing, there is no economic need to condition them on finding revenue offsets. It would be desirable to shorten write-off periods immediately. If a "pay for" is nevertheless demanded, a good option would be to trim low-value government spending.