Why Full Expensing Of Equipment Matters

Since federal tax reform was enacted five years ago, companies in the metals sector and broader manufacturing industry have been able to utilize 100 percent accelerated depreciation, or “full expensing,” to immediately deduct the cost of purchased capital equipment.

Unfortunately, unless Congress acts, current law says full expensing must be phased down each year until it is fully eliminated in 2027. Why does this change matter and why should MSCI companies weigh in to preserve full expensing? There are several reasons.

By reducing the cost of machinery, full expensing ensures small and medium-sized manufacturers can scale their operations, strengthen their teams’ productivity, and create more products that improve the quality of life for everyone. It also helps position the United States to attract capital investments in a competitive global economy. T

he elimination of expensing would come at a time when investment spending already is declining and when the Federal Reserve is tightening credit by raising interest rates. According to the nonpartisan, nonprofit Tax Foundation, the present value of $100 in depreciation deductions for a seven-year machine at five percent inflation is $76. The Tax Foundation says extending inflation protections to depreciation deductions through expensing of equipment, and dealing with the same issues regarding structures, would keep inflation from depressing economic growth and reduce the pain of fighting inflation when it recurs.

Want to weigh in on this matter with your federal lawmakers? Use this portal from the National Association of Manufacturers to do so.