Would you believe we can cut taxes in a way that will create more jobs and boost our economy – with no long-term loss of revenue to the state?
Normally, when a business buys office supplies, or raw materials for making products, or any other tangible item that will be used up in a short amount of time, the business can deduct that from its income before calculating its taxes. Because these are some of the expenses of running a business, taking a tax deduction for these items is often referred to as “expensing.”
However, when a business buys a vehicle for making deliveries, for example, or buys a machine or other equipment that will last for a while, it can normally only deduct, or “expense,” a portion of that cost each year over the anticipated life of that asset. The delivery vehicle, for instance, would be expensed over five years. (This is similar to depreciation, but there are some differences. For simplicity, I’m combining the two, only using the term “expensing,” since the effect of what I’m about to describe is essentially the same for both.)
The federal Tax Cuts and Jobs Act, passed in late 2017, temporarily made it possible for businesses to fully expense those longer-term assets in the year they were put into service, rather than doing so over time. Beginning this year, major portions of that law will be phased out over five years.
Mississippi could and should set itself apart by making full and immediate expensing a permanent part of our state tax code in spite of the federal phase-out.
How would this benefit Mississippi’s economy? It would incentivize and enable companies to invest more quickly in growing their capacity, which leads to employing more people, which leads to economic development without government grants and subsidies.
Contrary to popular belief, business investment is the way an economy grows, not stimulus payments, which is the usual tool of politicians because it’s immediately visible.
When business owners invest in their companies, no matter how big or small the business, they build their capacity to make more
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