Permanently Extending A 50% Tax Deduction for the Cost of New Business Equipment (H.R. 2510)

What is H.R. 2510?

(Updated March 15, 2018)

The bill would extend previous legislation that gives a 50 percent tax break to businesses that invest in new equipment. Basically, the bill makes taxes on equipment purchases half as expensive for businesses. It’s important to note that this bill makes the 50 percent deduction permanent, as opposed to previous legislation, which had to be periodically renewed.

For example, if a factory owner wants to buy a new assembly line but needs new equipment to do so, this bill makes the taxes for buying that equipment half as costly for the factory owner.

Additionally, plants that are for a farming business (nuts, berries, etc.) are counted as a type of business equipment. This means that the bill gives farmers the 50 percent deduction on plants, in addition to a plant-specific deduction.

The bill also increases the maximum allowable deduction for cars by $8,000. This means if a taxi company wants to buy 5 new cars, they might not get the full 50% deduction, but the amount that they receive back per car is $8,000 higher because of the bill.

Argument in favor

Allows businesses of all sizes to invest in their own productivity, thereby helping themselves while creating new jobs.

Argument opposed

The bill significantly raises the federal deficit at a time where Congress should be working to make the already massive deficit smaller.

Impact

Businesses wishing to invest in equipment; businesses selling new equipment.

Cost of H.R. 2510

The CBO estimates that the bill would reduce federal revenues by $262,911,000,000 over the period from 2014-2024.

Additional Info

In Depth: Sponsoring Rep. Patrick Tiberi (R-OH) explained in a press release that the bill would incentivize businesses to grow and hire more workers: 

“Time and again Ohio employers have told me that the ability to immediately deduct half the cost of qualified purchases frees up more money to invest in their businesses. It only makes sense that making this deduction permanent allows employers to effectively plan for their future needs and incentivizes them to grow and create jobs.”

Rep. Richard Neal (D-MA) took issue with the bill because it would increase the federal deficit by close to $300 billion, stating that: 

“The policy is not in dispute. The process is.”

Rep. Sandy Levin (D-MI) also disagreed with the bill because it extends the 50 percent tax cut permanently, as opposed to the standard two year extension, stating that the tax cut’s: 

“temporary nature is critical to its effectiveness.”

Of Note: The bill is part of the tax cuts from the George W. Bush presidency. Until recently, the 50 percent deduction had been renewed every two years by Congress. However, this bill makes the 50 percent deduction permanent, which generated some opposition to the bill among Democrats.

This isn’t the first time Rep. Tiberi has tried to make the deduction permanent, either. In 2014, Rep. Tiberi introduced legislation to make the business equipment deduction permanent, and it passed the House before dying in the Senate. The current bill was also introduced in the Senate in 2015, but has yet to be voted on.

Media:

• CBO Cost Estimate
• Sponsoring Rep. Patrick Tiberi (R-OH) Press Release
• Rep. Sandy Levin (D-MI) and Rep. Richard Neal (D-MA)