The Obama administration said that it ‘strongly opposes’ a Republican measure passed by the House of Representatives in a 258 to 160 vote, to permanently extend a temporary business tax break adopted in 2009 to help US companies recover from the financial crisis.
Known as ‘bonus depreciation’, the tax break encourages companies to invest in new equipment by allowing them to deduct 50% of the costs of certain equipment purchases immediately, instead of depreciating the costs over years. That also allows them to reduce their federal tax bills. The measure is of particular benefit to capital-intensive companies.
Although the rule is temporary, Republicans aim to extend it and make it a permanent part of the tax code; a measure forecast to cost US taxpayers around US$287bn over the next 10 years. The proposal includes no accompanying measures to offset its costs, which would enlarge the federal deficit.
The measure was drafted by Republican representative Pat Tiberi, who has stated that “bonus depreciation helps grow the economy and encourages job growth.”
However, a statement issued by the White House confirmed that bonus depreciation “was never intended to be a permanent corporate giveaway.”
The Obama administration has threatened to veto the bill, making it unlikely the measure will become law any time soon. Opponents claim that removing the provision’s temporary nature undermines its value as a stimulus to business.
Cash-flow based metrics now feature prominently alongside traditional revenue measures of business performance in the key figures or financial summary pages of any public company.
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