Using ACRS To combat current economic problems

I have a teacher that insists if we allowed companies to use ACRS again that we would be able to quickly rise out of the recession. It would cause many companies to expand right away, thus spending money and creating jobs across almost every industry. Since depreciation would have increased so much, tax revenue would deecrease for the companies using it. But, tax on all the industries that support the building of new properties, (construction, metals, textiles, oil, gas, ect.) basically everything is connected, the tax revenue from these services would go up due to more business. Also, income tax revenue would increase due to more jobs.

If you do not know what ACRS is, it was introduced while Reagan was in office in 1981. Basically, it allows companies to depreciate property extremely fast, this greatly increases their cash flow in the initial years. It greatly spurred the economy on, created jobs, and encouraged companies to spend their money instead of just holding it.

I want to know what do you guys think? Would it work? Would it really be as simple as to allow ACRS to be used for the next couple years and change the current state of the economy?

It makes sense to me, an increase in building of depreciable property would impact almost every industry in America. I think that the taxes lost due to more depreciation would be offset by the increase in other tax revenues.

2 Comments
 

Maybe I'm completely off here, but in my limited experience with this type of thing I'm under the understanding that for tax purposes companies do use MACRS, and for financial reporting purposes they can use any number of depreciation methods so long as it's disclosed.

 

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