Senator Rand Paul (R-Ky.) last week introduced S.2350, the “Full Expensing Act of 2015.” This legislation 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. This legislation will level the playing field, increase economic growth, and help businesses create more jobs. ATR fully endorses this important legislation and urges all Senators to vote for and support the Full Expensing Act.

Currently, the tax code forces the costs associated with business fixed investment to be slowly deducted over several to many years, in an arbitrary process known as “depreciation.” Under this system there is a bizarre patchwork of rules governing depreciation that varies widely depending on the purchase. 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. 

Ideally, all purchases should be treated equally.  Business fixed investment is one of the cornerstones of productivity growth. Without productivity growth, you don’t get economic growth. Without economic growth, our living standards remain stagnant or fall.

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. 

Senator Paul’s Full Expensing Act will create much needed certainty and level the playing field for businesses large and small, will increase economic growth, and will create more jobs. ATR supports this important, pro-growth legislation and urges Senators to fully support this bill.