Depreciation Lives and Methods: Current Issues in the U.S. Capital Cost Recovery System

Posted: 12 Oct 2000

See all articles by David W. Brazell

David W. Brazell

U.S. Department of the Treasury, Office of Tax Analysis (OTA)

James B. Mackie III

U.S. Department of the Treasury, Office of Tax Analysis (OTA)

Abstract

In part because of concerns that the tax depreciation system may be dated and may not properly measure income, Congress directed that the Treasury study the current tax depreciation system. This paper is derived from the staff work for the Treasury Study. The paper first discusses the rationale for a depreciation allowance. It next describes the current tax depreciation system. Using the cost of capital, the paper evaluates the current tax depreciation system. It then discusses several comprehensive reforms of the tax depreciation system, and calculates the effects of these reforms on the cost of capital. The final section discusses several practical problems with the current tax depreciation system.

JEL Classification: K34, G31

Suggested Citation

Brazell, David W. and Mackie, James B., Depreciation Lives and Methods: Current Issues in the U.S. Capital Cost Recovery System. Available at SSRN: https://ssrn.com/abstract=240718

David W. Brazell (Contact Author)

U.S. Department of the Treasury, Office of Tax Analysis (OTA) ( email )

1500 Pennsylvania Ave., N.W.
Washington, DC 22203
United States

James B. Mackie

U.S. Department of the Treasury, Office of Tax Analysis (OTA) ( email )

1500 Pennsylvania Ave. NW
Washington, DC 20220
United States
(202) 622-1326 (Phone)

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