Corporate tax break or investment discouragement
You often hear of the corporate tax breaks that the IRS through Congress action give corporations. However, what is often the case, is that Congress is deciding what expenses can be recognized when.
Companies spend money. And some cases they can deduct that spending in the same year they spend it. However, in many cases, they are not allowed to deduct those expenses in the year they spend it. They have to spread those expenses over several years. When they invest in equipment, they have to depreciate it over several years. Investments in research and development were allowed to be expense in the year they were spent. Now, the IRS is requiring research and development expenses to be spread over multiple years.
This increases the taxes the companies have to pay in the year they are investing. And while they will then pay lower taxes in later years, this requires companies to find money in the current year to pay the current taxes.
This discourages investment in research just as it discourages investment in equipment.
So, you see, it’s not tax breaks. It’s removing penalties on investment. Investment is good.
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