Providing Full Cost Recovery for Investment and Lowering Taxes on Firms Are Best Options for Boosting Growth by Garrett Watson published by Tax Foundation (4/2021).
“As policymakers consider tax options to boost the U.S. economy’s long-run economic growth, they should consider reforms that would increase growth the most while minimizing forgone tax revenue. Using our new book, Options for Reforming America’s Tax Code 2.0, we find that providing a full and immediate deduction for business investments, as well as lowering taxes on businesses, such as the corporate income tax, are some of the best options for boosting U.S. growth for the revenue forgone.
Take, for example, providing a full and immediate deduction for all capital investment made by businesses. We find that this would boost long-run GDP by 2.3 percent, while raising the after-tax income for the bottom 20 percent of income earners by 2.1 percent. Federal revenue would be about $1.7 trillion lower over 10 years on a conventional basis, and $1.2 trillion lower after accounting for economic growth. However, this cost is reduced past the budget window as deductions for the existing capital stock begin to phase out…”
