(Bloomberg) The U.S. House Ways and Means Committee voted to let companies write off more than half the cost of some investments immediately, providing a $287 billion tax cut to capital-intensive industries.
The proposal, approved today on a 23-11 vote along party lines, would revive the bonus depreciation tax break that lapsed Dec. 31. The measure would extend indefinitely the tax break that began in 2008 to spur economic growth.
Business groups such as the National Association of Manufacturers and the Outdoor Power Equipment Institute support the plan.
“At a time when capital expenditures are at levels that are anemic, this will increase investment and grow our economy,” said Representative Pat Tiberi, an Ohio Republican.
The proposal, which is unlikely to become law any time soon, marks a shift for Republicans from the draft tax code revamp that Ways and Means Chairman Dave Camp released in February. In that plan, Camp, a Michigan Republican, proposed slowing write-offs to help pay for lower tax rates.
Democrats said bonus depreciation was designed as a temporary economic stimulus and would lose its effectiveness as an incentive if it has no expiration date. They also said that extending the policy indefinitely would increase the budget deficit.
“The cost of bonus depreciation, for extending it this way, could pay for a full-year extension of unemployment benefits 10 times over,” said Representative Sander Levin of Michigan, the top Democrat on the Ways and Means panel.
Camp said that many provisions under consideration have already been extended repeatedly without budgetary offsets.
“We shouldn’t have to raise taxes other places in the economy to keep current tax laws,” he said.
Today’s vote is part of a broader dispute between the House and Senate over how to handle dozens of tax provisions, including bonus depreciation and the research and development tax credit.
The Senate Finance Committee approved extensions of almost all of the expired policies through the end of 2015. That proposal didn’t advance in the full Senate earlier this month because of a dispute over which Republican amendments would be allowed.
The Republican-led House is picking individual provisions and making them permanent.
Camp rejected a suggestion from Democrats that Congress would ultimately choose the Senate approach in a post-election session.
Other senators “are happy with temporary policy,” said Camp, who is retiring at the end of the year. “I’m not.”
The panel also approved five bills expanding tax breaks for charitable contributions. Those include indefinitely extending an expired provision that allows some direct transfers to charities from retirement accounts. As much as $100,000 per taxpayer over age 70 1/2 can be excluded from income annually.
Another bill would let taxpayers make charitable contributions up to the April 15 individual tax-filing deadline and deduct them from taxes being filed then.
If that became law, taxpayers would be able to make donations on April 1, 2015, and deduct the amount from their 2014 taxes.
The depreciation bill is H.R. 4718. The bill on retirement contributions is H.R. 4619 and the bill on the April 15 deadline is H.R. 3134. The other measures approved today are H.R. 2807, H.R. 4691 and H.R. 4719.