Washington, D.C. – U.S. Senator Pat Toomey (R-Pa.) and U.S. Congressman Jodey Arrington (R-Texas) are teaming up to help ensure America’s economic recovery continues, wages keep rising, and employers keep hiring.
The Accelerate Long-Term Investment Growth Now (ALIGN) Act makes permanent the full and immediate expensing provision of the 2017 Tax Cuts and Jobs Act. Currently, this provision is set to begin winding down at the end of 2022.
“The end of the COVID-19 pandemic is in sight, and Congress should enact policies that enable workers and job creators to propel our economic recovery,” said Senator Toomey. “Allowing businesses to immediately write off purchases of new equipment was one of the most pro-growth features of the 2017 tax reform law. Capital investment grew and workers became more productive, resulting in more jobs and higher wages. Our legislation will make full expensing permanent, providing manufacturers and businesses of all sizes with more certainty regarding investment planning and growth.”
“There’s no bigger incentive in the tax code for job creation and economic expansion than allowing businesses, both large and small, to fully and immediately deduct the cost of new investments, equipment, and machinery,” said Congressman Arrington. “Full expensing was a critical component to the Tax Cuts and Jobs Act, and the economic boom that ensued prior to the pandemic. Unfortunately, this powerful provision will soon phase out, creating uncertainty for businesses as they look to rebound from the economic fallout and prepare for future expansion and innovation. The ALIGN Act will lower the cost of capital and simplify the tax code as businesses look to make vital investments, bring workers back, onshore manufacturing capabilities, and ramp up production. This legislation will lead to stronger growth, more jobs, increased productivity, and higher wages for working families.”
Joining Senator Toomey in introducing the legislation in the Senate are Senators John Barrasso (R-Wyo.), Roy Blunt (R-Mo.), Mike Braun (R-Ind.), Kevin Cramer (R-N.D.), Ted Cruz (R-Texas), James Lankford (R-Okla.), Rob Portman (R-Ohio), Jim Risch (R-Idaho), Marco Rubio (R-Florida), Tim Scott (R-S.C.), John Thune (R-S.D.), Thom Tillis (R-N.C.), and Todd Young (R-Ind.).
A full list of the groups supporting the ALIGN Act is available here, and the full text of the bill is available here.
What is Full Expensing?
From The Tax Foundation
When businesses calculate their income for tax purposes, they subtract their costs. This makes sense because the corporate income tax is a tax on business profits, or generally, revenues minus costs. However, businesses are not always allowed to subtract the amount they spend on capital investments, such as when businesses purchase equipment, machinery, and buildings. Typically, when businesses incur these sorts of costs, they must deduct them over several years according to preset depreciation schedules, instead of deducting them immediately in the year the investment occurs. Full expensing allows for immediate deductions of capital costs in the year the expense occurs.
Real-world Application
Last year, Guy Berkebile of Guy Chemical Company in Somerset, Pa. shared how because of full expensing, it was more affordable to purchase equipment to make his company more productive. He furnished a new laboratory, purchased equipment needed for production, and was able to write off the full cost of those investments in the tax year he purchased them. As a result, Guy Chemical Company saw a 30 percent increase in sales and created 29 new jobs.