WASHINGTON, D.C. – Today, Ways and Means Chairman Jason Smith (R-MO) and Senate Finance Chairman Ron Wyden (D-OR) announced the final Tax Relief for American Families and Workers Act. This legislation, the result of extensive bipartisan, bicameral negotiations, includes Chairman Arrington’s Accelerate Long-term Investment Growth Now (ALIGN) Act. The bill would allow businesses to continue to immediately expense new business equipment, which was included in the 2017 Tax Cuts and Jobs Act.
“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 Rep. Arrington. “Full expensing was a critical component to the Tax Cuts and Jobs Act, and the economic boom that ensued prior to the pandemic. 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. I’m pleased that this legislation recognizes the importance of full expensing to our country’s job creators.”
Background
Full expensing, a key provision of the Tax Cuts and Jobs Act, allows businesses to deduct the full cost of new investments in the year they were made.
In 2023, the provision phased down from a 100% deduction to 80%. This will drop annually by 20% until it is fully phased out in 2027.
According to the National Association of Manufacturers, 88% of manufacturers cited higher tax burdens on manufacturing activities as a barrier to growing their workforce; investing in new equipment; or expanding facilities.
There has been some form of full expensing in the tax code in 21 of the past 23 years—under both Democrat and Republican presidential administrations.
The Tax Foundation has found that making full expensing permanent would increase long run economic output and add tens of thousands of jobs.
