The Senate passed its tax bill recently, and well, there have been plenty of responses, most negative. One relatively overlooked provision involves what accountants describe as the expensing of equipment and qualified property. As a colleague recently explained to me, the Senate bill would, in short, allow businesses to immediately write off (‘expense’) the cost of qualified property (not including structures) acquired and placed in service after September 27, 2017 and before January 1, 2023 (January 1, 2024 for certain limited categories). The Senate amended the Finance Committee bill to phasedown full expensing by 20 percent a year in the case of property placed in service after December 31, 2022 and before January 1, 2027.
There are lots of things about the bill I find deeply disturbing (to say the least), but here’s one that, like others, is a head-scratcher. By being able to immediately expense equipment, companies will be effectively encouraged to buy machinery, further accelerating the world’s turn to technology and automation, and in the process depressing the demand for labor. Without the safeguards in place to deal with this massive change in the country’s economic structure, such a policy will likely bring no relief to a struggling middle class looking for their first real wage increases since the financial crisis.