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P.S. Wouldn't expensing all capital investments distort investment in favor of long-term capital? If all capital investment were expensed, I'd rather buy one $2000 machine in 2010 that lasts two years than one $1000 machine in 2010 that lasts one year and another $1000 machine in 2011 that lasts the next year. The price would be the same and the work done would be the same, but the longer term asset would give a $1000 deduction one year sooner.
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From above: "For example, depreciation tax rules allow durable capital to be depreciated more slowly than less durable capital, which lowers the relative tax rate on more durable capital." This seems backwards. Quicker depreciation gives the taxpayer the money sooner. Isn't my relative tax rate lower if I can put some money in the bank earlier? And it also seems too simple. If depreciation were exactly accurate, 10 years for an asset that lasts 10 years and 2 years for an asset that lasts 2 years, would there be any tax incentive for investing in one asset over the other? The rate for each asset would reflect true depreciation of the asset, and the income generated by the asset would be exactly measured, so it would seem that the tax code would create no distortion of which asset to buy.
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Jul 6, 2013