Expensing and Interest in the GOP Blueprint: Good Deal? Good Idea?

12 Pages Posted: 31 Jan 2017 Last revised: 2 May 2017

Chris William Sanchirico

University of Pennsylvania Law School; University of Pennsylvania Wharton School - Business Economics and Public Policy Department

Date Written: January 31, 2017

Abstract

November’s election thrust to the fore the tax reform Blueprint released last June by House GOP leaders. One of the plan’s key features, which has received surprisingly little attention, is its treatment of business investment. Outlays for plant, equipment and other business assets would be immediately deductible, rather than depreciated over time, while interest costs would be deductible only to the extent of interest income. This plan to replace net interest deductions with expensing of capital outlays is likely to hurt most businesses — some significantly — and so is likely to face a growing chorus of objections in coming months as this becomes clear to business leaders. Moreover, claims made about this part of the Blueprint’s positive impact on the economy — that it will reduce distortion and encourage investment — are subject to significant caveats and are, in some cases, contradicted by the conceptual understructure of the plan itself.

Keywords: Expensing, Interest, Depreciation, Tax Reform Blueprint, Business Investment

JEL Classification: H2, H25, K34

Suggested Citation

Sanchirico, Chris William, Expensing and Interest in the GOP Blueprint: Good Deal? Good Idea? (January 31, 2017). Tax Notes, April 17, 2017, pp. 339-350; U of Penn, Inst for Law & Econ Research Paper No. 17-4. Available at SSRN: https://ssrn.com/abstract=2908926 or http://dx.doi.org/10.2139/ssrn.2908926

Chris William Sanchirico (Contact Author)

University of Pennsylvania Law School ( email )

3501 Sansom Street
Philadelphia, PA 19104
United States
215-898-4220 (Phone)

HOME PAGE: http://www.law.upenn.edu/faculty/csanchir/

University of Pennsylvania Wharton School - Business Economics and Public Policy Department

3641 Locust Walk
Philadelphia, PA 19104-6372
United States

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