Government likely to roll back tax incentives

July 9, 2020 By    

In late March, the U.S. government approved a $2 trillion relief package to help fight the impact of COVID-19. This package, known as the Coronavirus Aid, Relief and Economic Security Act, was the first in a series of economic relief bills.

Now, there are talks about another package known as the HEROES Act. The HEROES Act has passed the House of Representatives, at the time of this writing, and contains an estimated $3 trillion of relief funds directed toward various areas of the economy. This money will need to be paid back at some point. The easy way to do this – other than to decrease government spending – is to increase taxes.

Currently, two programs can help businesses manage taxes – Section 179 and bonus depreciation. The two tax incentives allow a business to depreciate 100 percent of its eligible asset purchases in the tax year when the asset was purchased. These tax cuts were extended and limits were increased as part of the Tax Cuts and Jobs Act that passed in 2017. Section 179 and bonus depreciation extend through 2023, allowing companies to depreciate 100 percent of the asset. First-year depreciation will be phased down after 2022, making the incentive to buy assets less attractive.

The debt on the Federal Reserve’s balance sheet must be paid back at some point. The most likely payback option is to increase taxes. This includes income taxes and tax stimulus programs. While it may be hard due to the current times, it is much more attractive to make asset purchases before 2023, as these tax incentives will likely be cut to help pay back the debt.

Cooper Wilburn is a consultant at Propane Resources. He can be reached at 913-262-0196.

This article is tagged with and posted in Blue Flame Blog, COVID-19, Current Issue

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