Presently, there is 100% first-year tax expensing for equipment purchases in the rest of 2011, and 50% first-year bonus tax depreciation for equipment purchases in all of 2012.
To stimulate presently dormant US economic growth, my first proposal here is to up the 50% first-year bonus tax depreciation in 2012 to 100% first-year tax expensing.
The 100% first-year tax expensing is indeed a substantial first-year earnings generator for US Big Corps. The 50% first-year bonus tax depreciation is also a nice first-year earnings generator for US Big Corps.
However, neither of them are job creators. When I study past implementations of 50% bonus tax depreciation, this non-job-creating conclusion is pretty clear cut.
Also, they are both substantial short-term drains on US Government financial coffers.
So, the question to be raised is why in the world would the US Government permit 100% first-year tax expensing and 50% first-year bonus tax depreciation?
I think the answer is that the Big Corps again hustled the Obama Administration and the US Congress by deceptively convincing them that it would create tons of full-time US jobs. What absolute, complete self-serving hogwash.
At some point, I think the US Government will get wiser and realize that it can’t trust US Big Corp assertions like these.
Although they will all publicly say otherwise, the overwhelming majority of US Big Corps have no interest in full-time US job creation for their individual firms. They are only interested in their Corporation’s profits. They work for their stockholders. Their patriotism to their stockholders far out-trumps their patriotism to their country.
Given this unfortunate selfish environment, I still think there is a wise way to turn 100% first-year tax expensing for equipment purchases into a true job creator, and to do so cost effectively.
My proposal here would not permit 100% first-year tax expensing in either the rest of 2011, or in all of 2012, unless a business also has a sufficient number of net new jobs added in the period the equipment is placed in service. The Feds can decide the proper amount of accelerated tax depreciation to be permitted per net new job added.
In addition, there should be tax depreciation recapture in situations where the businesses getting 100% first-year tax expensing don’t retain these net new job additions for a certain period of time, like for four years.
In addition to being a true job creator, such an approach also spends US Government funds wisely. If the business purchasing equipment doesn’t add to their full-time job count, it doesn’t cost US taxpayers a dime in the first year.
Also, US taxpayers get their money back later if the business getting first-year 100% tax expensing, doesn’t retain its full-time employee adds for a reasonably long period of time.
And to help smaller businesses, and also larger businesses in a tax loss situation, I also would give all businesses a choice. They could either take the 100% first-year tax expensing for the remainder of 2011 and all of 2012, or they could instead choose an upfront tax equivalent refundable tax credit, with no subsequent tax depreciation allowed.
This latter approach fairly lets smaller firms and troubled larger firms get the same economic benefit from first-year 100% tax expensing as that received by Big Corps.
In addition, the latter approach makes it much more likely for smaller business and troubled larger businesses to get financing for an equipment purchase.
