Out of Control Policy Blog

Depreciation Policy For Those Congress Likes

An article in The Hill this morning reports that House Democrats are pushing their GOP colleagues to support “bonus depreciation” to promote economic growth. Under the proposal, businesses could deduct 100% of the cost of capital equipment in the year in which they make the investment. Since the proposal would only apply through the end of this year, it’s unlikely to have a large impact, especially for large capital investments. Given the economic doldrums our economy has been stuck in for the past four years, a far longer time frame—perhaps even a permanent change of this sort—would make better sense.

But I’m struck by the contrast between this proposal and two previous proposals on the subject of depreciation from leading Democrats. Last year President Obama proposed eliminating accelerated depreciation for those who purchase business jets. Even though these planes can be very productive business tools, our President has several times gone out of his way to demonize this depressed segment of the aviation industry. And just last month, Sen. Jeff Bingaman (D, NM) slipped into the Senate surface transportation bill several amendments aimed at discouraging highway public-private partnerships, such as the long-term lease of the Indiana Toll Road, the proceeds of which have fully funded a 10-year highway investment program in Indiana.

One of the anti-PPP measures would forbid accelerated depreciation of such assets, dramatically changing the economics of such PPPs. A companion measure would penalize states that lease toll roads by cutting off a portion of their federal highway funds. According to today’s Democrats in Washington, fast depreciation is good for the economy—except when it’s not. And it’s not if you are a company seeking to increase the productivity of top executives’ travel or if you are a pension fund seeking to invest in transportation infrastructure because it’s a good fit with your long-term obligations to retirees.

Why can’t politicians stick with simple rules that apply across the board to everyone?

Robert Poole is Searle Freedom Trust Transportation Fellow and Director of Transportation Policy


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