Is Tax Reform On Or Off? Odd Activities In The House Last Week

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Written by Annette Nellen | Posted in Corporate • Individual • Tax Policy

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.

* Depreciation is a timing item. Slowing down depreciation is only a revenue raiser because it is measured over 10 years rather than infinity.

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Original Post By: Annette Nellen

Annette Nellen

Annette Nellen, CPA, Esq., is a professor in and director of San Jose State University’s graduate tax program (MST), teaching courses in tax research, accounting methods, property transactions, state taxation, employment tax, ethics, tax policy, tax reform, and high technology tax issues.

Annette is the immediate past chair of the AICPA Individual Taxation Technical Resource Panel and a current member of the Executive Committee of the Tax Section of the California Bar. Annette is a regular contributor to the AICPA Tax Insider and Corporate Taxation Insider e-newsletters. She is the author of BNA Portfolio #533, Amortization of Intangibles.

Annette has testified before the House Ways & Means Committee, Senate Finance Committee, California Assembly Revenue & Taxation Committee, and tax reform commissions and committees on various aspects of federal and state tax reform.

Prior to joining SJSU, Annette was with Ernst & Young and the IRS.