Continued bonus depreciation or tax reform?

One of the 57 federal tax provisions that expired at the end of 2013 was 50% bonus depreciation. That has been a temporary provision for several years, primarily aimed at helping economic recovery. It's also been a generous provision (it was even 100% for a few years). With 50% bonus depreciation, a business claims depreciation on new equipment in the year it is placed in service equal to 50% of the cost + normal depreciation on the balance. If the company was also eligible for Section 179 expensing, it would first claim $500,000 and then take 50% of the balance and then normal depreciation on the balance.

Temporary tax provisions are often renewed well after they expire. These temporary provisions all "cost" money because they result in reduced tax collections. To be extended in a revenue neutral bill, Congress has to find "offsets" - other tax increases or spending cuts.

Some of these temporary provisions, such as bonus depreciation, are for economic stimulus.  Isn't the economic downturn over?  Some of the provisions are to serve a specific purpose, such as encouraging hiring of certain workers or buying certain energy efficient equipment.  Do we have data on whether these provisions met their goals?

How does possible extension tie with calls for comprehensive tax reform where tax rates are lowered and the base broadened?  One easy way to help broaden the base would be to let the temporary provisions that expire remain expired!  After all, it is difficult enough to remove or cut back permanent tax preferences; it's easy to let the expired ones stay that way.

So far as bonus depreciation, I think any effort to extend it calls into question just how serious elected officials are to lower the corporate tax rate or engage in comprehensive tax reform.  One significant way to pay for a lower corporate tax rate would be to slow down depreciation.  And that has been proposed - including in the past few weeks by Senator Baucus, Chair of the Senate Finance Committee. His tax reform discussion draft on cost recovery calls for moving from MACRS to asset pools for depreciation, extending the life of buildings from 39 to 43 years and extending the life of intangibles from 15 to 20 years (among other changes). In 2011, the Joint Committee on Taxation suggested that about 70% of the cost to lower the corporate rate from 35% to 28% would come from converting from MACRS to the slower Alternative Depreciation System (ADS)  That's because other changes, such as repeal of LIFO, don't generate enough dollars to fund any significant drop in the corporate rate.

So, let's see what happens with any discussion of extending any of the provisions that expired in December 2013, particularly the 50% bonus deprecation and shorter life for certain assets such as race horses and leasehold improvements.  If they get extended, should we just drop the thought that we'll see revenue neutral comprehensive tax reform with lowered rates in the near future?

What do you think?