CRANE - New Study: Repealing Accelerated Depreciation Would Cause Massive Increases in Cost of Capital for Investment
Chad Kolton

October 7, 2015

WASHINGTON, DC – Repealing accelerated depreciation would significantly increase the cost of capital U.S. businesses use to invest domestically in new equipment, thereby slowing economic growth according to a new study by former economists from the Joint Committee on Taxation (JCT). The authors, partners at Quantria Strategies, reported that even if repealing accelerated depreciation was paired with a reduced corporate tax rate, the long-term result would still be slower economic growth.

“Repealing accelerated depreciation would essentially be a tax hike on capital used for domestic investment. The predictable result would be reduced investment, fewer jobs and less economic growth,” said Kevin M. Dempsey, Senior Vice President for Public Policy at the American Iron and Steel Institute. “The increase in the cost of capital would be even more harmful to capital investment if the expiration of bonus depreciation were part of the bill."

The Quantria study found that repealing accelerated depreciation would increase the average cost of capital for investment in equipment across all industries by an estimated 8.1%. In certain sectors such as manufacturing, transportation, mining and utilities the cost of capital for investment would increase more severely over present rates if accelerated depreciation were repealed.

“Increases in cost of capital resulting from [accelerated depreciation] repeal creates incentives that reduce investment and dampen future economic growth,” the study authors wrote.

A copy of the study can be found here.

Quantria Strategies includes former economists at the JCT with more than 40 years of experience in analyzing policy and legislative proposals.

The CRANE Coalition is made up of American companies and associations focused on preserving accelerated depreciation to provide the capital needed to continue driving America’s economic growth and job creation here at home.