Latest news with #expensing
Wall Street Journal
7 hours ago
- Business
- Wall Street Journal
Making a More Beautiful Tax Bill
Senate Republicans are pitching President Trump on improvements to the House tax bill, and one important priority is making its business tax cuts permanent. This would help the economy and provide businesses with more certainty amid tariff disruption and deficit fears. One of the 2017 tax reform's most constructive changes was letting businesses immediately deduct the full cost of capital investments rather than spread them out. Instead of writing off a $100,000 machine over its useful life-span—say, $10,000 a year over 10 years—businesses were allowed to immediately expense the full cost as they do operating costs. Because inflation reduces the value of future deductions, a company might recover only 80% or less of the cost of an investment under typical depreciation schedules. By reducing the cost of capital, expensing spurs investment. It also eliminates tax distortions that are created when businesses in different industries write off assets on different schedules. Republicans in 2017 made full expensing temporary because they wanted to keep the estimated cost of their tax bill to $1.5 trillion. Full expensing for equipment began to phase out after 2022. Companies that year also had to begin deducting their research and development costs over five years rather than immediately, which upended a decades-old policy.
Wall Street Journal
13-05-2025
- Business
- Wall Street Journal
One Cheer for the House Tax Bill
The House Ways and Means tax bill is out, and it resembles the rest of Trump II economic policy: The best parts are from the first term, and the worst are from the second. The overall bill is largely a political document focused more on massaging a hundred constituencies than helping the economy grow. The good news is that the bill makes much of the 2017 tax reform permanent, notably the lower income-tax rates across tax brackets. The best growth provision restores 100% expensing for equipment purchases, which was gradually phasing out, but only through 2029. It also expands bonus depreciation to new factories through 2028. Too bad these non-permanent provisions will inevitably steal some growth from the future.
