A renewed push for permanent changes to capital investment and R&D deductions is gaining traction in Washington, according to a new report from the Tax Foundation. The study highlights the economic benefits of expensing, a policy that allows businesses to fully deduct capital costs immediately rather than spreading them over several years.
Expensing is seen as a powerful tool to spur growth by reducing capital costs, enabling businesses to invest in projects that might otherwise be unfeasible. Proponents argue that it removes a tax penalty on investment, improves cash flow for businesses, and ultimately leads to a healthier economy. The Tax Foundation estimates that making full bonus depreciation permanent would cut federal revenue by $432 billion over the next decade. However, after accounting for economic growth, that cost would drop to $243 billion, with a projected 0.4 percent increase in long-term GDP.
While policymakers debate whether offsets or complementary reforms are needed to manage revenue losses, the Tax Foundation cautions against short-term fixes. Temporary cost recovery measures, the report notes, offer little to no sustained economic benefits.
In other federal tax news, Congress is revisiting the taxation of university endowments. A policy first introduced in 2017 may see an increase in tax rates as Republican lawmakers look for revenue-raising measures in 2025. Additionally, new tariffs on Canada, Mexico, and China—set to take effect as early as February 1—could reduce economic output by 0.4 percent and impose $1.2 trillion in new taxes by 2034.
At the state level, remote work continues to reshape tax policies. States like Arkansas are proposing reforms to ease tax burdens for nonresident workers, while New Jersey and Utah are exploring changes to economic nexus rules for out-of-state businesses. These efforts aim to balance competitiveness and tax compliance in a rapidly evolving work environment.
Globally, the European Union is pushing for a unified tax and corporate law framework to streamline business operations across its member states. The proposal, championed by European Commission President Ursula von der Leyen, aims to strengthen the EU’s single market by simplifying tax rules.
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