Encouraging Investment in America

By / 1.24.2014

In an ideal world, Congress would take up tax reform comprehensively, as part of a high-growth strategy. In fact, PPI is currently working on a tax framework for progressives, for how to modernize the entire tax system for individuals and corporations.

Unfortunately, the reality is that wholesale reform is not currently a politically viable option. Therefore, we must consider discrete pieces of tax legislation, with the idea that as long as we are promoting innovation and growth, small measures are better than nothing. One such tax measure currently up for Congressional debate is an extension of the so-called “bonus depreciation” deduction, first enacted in 2008. The intention of the deduction is to encourage U.S. companies to invest domestically, by allowing them to deduct 50 percent of their capital expenditure costs upfront instead of over time. In other words, it makes it more financially attractive for U.S. companies to invest in America – be it to increase factory production, purchase new transportation equipment, or deploy broadband networks.

PPI has done extensive research on the importance of encouraging domestic investment as part of a high-growth strategy. Our annual “U.S. Investment Heroes: Companies Betting on America’s Future” report highlights the top 25 U.S. companies investing in America’s productive capacity, through their domestic investment in plants, properties, and equipment. In our 2013 report, we found that “several companies on our list highlighted this measure [bonus depreciation deduction] in their discussion of 2012 capital investments” as a key reason for their strong U.S. investment.

Investment is the building block for job creation and gains in wages and standard of living. That means we must do everything we can to promote economic growth through investment, including the extension of the bonus depreciation deduction.