There's a lot of buzz on Capitol Hill right now about one or more Republican "growth packages" to counter President Obama's "Stimulus 2" plan.  Any GOP plan should have full business expensing of assets.

What is expensing?  Full business expensing allows companies who purchase business assets (computers, furniture, etc.) to deduct the full cost of those assets from their taxable income in the year of purchase.

How do businesses account for assets if they can't expense them?  Absent an expensing policy, medium-sized and larger businesses are required to slowly-deduct ("depreciate") the cost of these assets over several years.  For example, a computer must be deducted slowly over a five-year period.  Some assets, like buildings, have to be depreciated over periods as long as 40 years.

Why is expensing better than depreciation?  All purchases should be treated equally.  If a business purchases a box of paper clips, it can be written off the first year.  But if it purchases a desk, it takes seven years to recover the cost.  This distorts business decisions by changing the tax treatment of purchases.  In addition, denying a full deduction for capital expenditures serves to bias the tax code away from investment and in favor of consumption.  The tax code should treat all decisions equally.  A deduction delayed is a deduction denied, especially when inflation is a factor.

Don't we already have full business expensing?  Partially, and temporarily.  Smaller companies in 2011 can expense up to $500,000 of equipment, with this ability reduced dollar-for-dollar for all equipment purchases exceeding $2 million.  In addition, all taxpayers can expense up to 100% of business purchases (besides buildings) in 2011.

What should the right policy be?  The ability of companies to expense 100% of business purchases should be made a permanent feature of the tax code.  In addition, it should be expanded to include real property and so-called "intangible property."  This is a must-have feature of any real growth package.

What do you think?  Does any GOP economic growth package have to include full business expensing?