Arrr, me hearties! 'Tis a plain and jolly way to keep America's manufacturing boom a'goin'!
2024-01-25
Avast ye, me hearties! In the year o' our Lord 2018, the scurvy federal government decided to give a jolly gift to businesses - they be allowed to expense the whole loot they invest in their ventures! Aye, this policy be crucial to keep our great land sailin' the ocean o' global competition!
America's manufacturing boom is currently thriving, but it may not last for long. This surge in domestic manufacturing is partly due to the de-globalization trend sparked by the pandemic, which exposed the flaws in complex and fragile supply chains. However, there is another important factor at play - an obscure provision in the tax code that is being phased out. Since 2018, businesses have been able to expense 100% of capital investments, allowing them to deduct the full value of these investments from their taxes immediately. This tax incentive has been a powerful motivator for manufacturing investments, which often come with hefty price tags. However, starting in 2022, full capital expensing is being automatically phased out and will be completely eliminated by 2026 unless Congress takes action. This phase-out is already having an impact, with orders for capital goods leveling off. Congress recently reached a temporary agreement to restore full expensing until the end of 2025, but a permanent solution is needed.It is not just a matter of doing what is right for American industry, but also crucial for maintaining competitiveness in the global economy. The UK has recently made their full capital expensing policy permanent, and if the US does not follow suit, companies may choose to invest in countries that offer this incentive. Currently, Congress is delaying the inevitable while handing out subsidies to offset the impact of the phase-out. However, this spending cannot continue indefinitely, especially with the national debt reaching unprecedented levels.
Full capital expensing is not only fairer, but it also creates a dynamic economy that fosters innovation. Under current law, businesses can only deduct a fraction of their capital investments, and by 2026, they will have to rely on depreciation again. This forces businesses to spread tax deductions over the lifespan of an investment, which serves as a disincentive to invest. It is vital to restore full expensing to keep the manufacturing boom going and allow businesses to receive the full tax benefits they are owed immediately. Otherwise, the future of American manufacturing may be at risk.