Sunday, June 1, 2014
Is tax reform on or off? Odd activities in the House last week
Last week, the House Ways and Means passed H.R. 4718 to make 50% bonus depreciation permanent (it expired after 12/31/13). This is in stark contrast to Congressman Camp's tax reform proposal of February 2014 that calls for straight-line depreciation (rather than accelerated) and longer lives, as a way to pay for a 25% corporate tax rate. The Joint Committee on Taxation estimates the cost over 10 years is $263 billion (JCX-63-14). H.R. 4718 does not include any revenue offset.
It is unlikely that this bill will be passed by the Senate given the cost and that it is not revenue neutral. Even if revenue were found, I think more politicians would rather use the revenue from converting slowing down depreciation to lower the corporate and individual tax rates.* The lower rates would also benefit all businesses while more favorable depreciation favors capital intensive business over labor intensive ones.
Other bills were also acted upon at the May 29 markup hearing.
What do you think?
* Depreciation is a timing item. Slowing down depreciation is only a revenue raiser because it is measured over 10 years rather than infinity.