A $300 billion business tax break meant to raise wages is instead helping companies replace workers

[applegrove]

A $300 billion business tax break meant to raise wages is instead helping companies replace workers with machines, study says

https://www.washingtonpost.com/us-policy/2019/02/13/billion-business-tax-break-meant-raise-wages-is-instead-helping-companies-replace-workers-with-machines-study-says/?utm_source=reddit.com&utm_term=.064ec0fdda14

By Christopher Ingraham at the Washington Post

"SNIP....

A $300 billion business tax break pitched as a way to boost hiring and wages had a modest effect on employment, no effect on wages and probably has accelerated the rate at which companies are able to replace workers with machines, according to a new working paper by researchers at Duke University and Grinnell College.

The tax break in question, known as bonus depreciation, allows businesses to take larger upfront write-offs on the depreciation, or expected wear and tear, of newly purchased equipment. It was introduced as part of the Job Creation and Worker Assistance Act of 2002, according to the Congressional Research Service, and was recently expanded as part of the Tax Cuts and Jobs Act of 2017.

Businesses are allowed to deduct the cost of equipment depreciation on their annual tax returns. Typically, this works out to a certain percentage of the price of a given piece of equipment each year. Bonus depreciation, however, allows a business to take some or all of that deduction upfront, in the year the equipment is purchased, rather than staggering it out over time.

The Tax Cuts and Jobs Act, for instance, allows businesses to deduct the full price of a piece of equipment in the year it is purchased. To use a $100,000 truck as an example, without bonus depreciation a business purchasing that truck would deduct its value over a period of six years, reflecting the depreciation in the truck’s value. Under the TCJA, the business can deduct the full $100,000 purchase price right away.

....SNIP"

[msongs]

1. corporate welfare recipients like umazon and gaggle love the free cash. nt

[smirkymonkey]

2. K&R

[fescuerescue]

3. I think the good outweighs the bad.

First, it's simply accelerating depreciating, not creating extra depreciation.

Second, for every AI robot that a company buys and expenses, there is probably 1,000 other pieces of capital equipment that IS purchased that isn't an AI robot.

And for everyone of those 1,000 items, even the AI robot, well it was built by some company that employed a bunch of people making and shipping it.

BTW, bonus depreciating has been around since 1958. I guess we can blame Eisenhower. It had been expanded a number of times over the years by presidents of all stripes. The latest was 2017, but its roots go way way back.