Hooray for new math,
New-hoo-hoo-math,
It won’t do you a bit of good to review math.
It’s so simple,
So very simple,
That only a child can do it!
–Tom Lehrer, “New Math”
That’s what I think of President Obama’s proposal for expensing of fixed assets. That was one part of his proposals to help the economy. Joe Kristan points out that it just speeds up depreciation from (say) five years to one year, but after five years the amount of income a company will have is identical. Of course, we’re also facing higher tax rates courtesy of the end of the Bush Tax Cuts…and that will wipe out any gains under this new plan.
But there’s a cost to this, too–and I’m not talking about whatever revenue ‘enhancements’ are proposed to balance the cost of this plan. Rather, many states will not conform to the new law (California is guaranteed not to). It will be yet another conformity issue for tax professionals and business owners to deal with.
If I were advising the President, I’d tell him there’s a simple fix to the economy. Just cut government spending and simplify the ridiculously complex Tax Code. Unfortunately, the chance of my advising the President is just about zero. Fortunately, that also appears to be the chance that this proposal becomes law.
