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Home Publications Blogs Beat the Press The Expensing Investment Tax Break Might Be Less Effective, Since We Are Already Half Way There

The Expensing Investment Tax Break Might Be Less Effective, Since We Are Already Half Way There

Monday, 20 December 2010 10:15
USA Today touted the portion of the recent tax package that allowed for 100 percent expensing of new investment. The piece neglected to mention the fact that the stimulus package already allowed for 50 percent expensing. This is likely to reduce the impact of going to 100 percent expensing.
Comments (2)Add Comment
written by izzatzo, December 20, 2010 12:12
Exactly Mr Whose Your Nanny. In neoclassical economics, the margin is everything. Without it, essential concepts like diminishing returns to tax breaks just collapse into a whole range of Marxist terms like sunk cost, fixed cost, indivisible cost, joint cost and common cost, none of which can encourage investment at the margin like a tax break based on incremental cost.

Any economist knows that the actual driver of investment is the very high marginal utility for wealth that never diminishes. Regardless of whether 50% or 100% of investment is expensed, the wealth investment effect swamps the effect of incremental cost every time, no matter how small the tax cut. Thank god for calculus and incrementalism.
written by bogperson, December 20, 2010 6:49
An economist knows that the actual drivel is investment. Is the very high margin, null utility for wealth? That never dims. Is his regard less of weather in the 50's or 100's? West wind is expected. The health benefits effectively swamp the effect of cremation costs every time. No matter. How small the axe cuts! Thank God for the calculus of mentalism.

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.