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The U.S. Senate is one vote away from propelling small business growth

March 19, 2024

By Sam Castillo

When my company wants to invest in our heavy equipment rental fleet — cement mixers, backhoes, excavators or welding equipment — we make it a point to buy from other local companies. It’s a way to grow our employee-owned business as well as feed our community’s economy at the same time. 

But a change in the federal tax code is making it harder and more expensive for us to reinvest in new equipment. Unless the U.S. Senate quickly passes the bipartisan tax reform package the House recently approved (H.R. 7024), companies equipment rental companies like mine, as well as businesses in other top Idaho industries such as agriculture, aerospace and semiconductor manufacturing, will see the cost of investments spike. We will be forced to choose between two bad options: cutting investments or raising prices. Neither choice is a good one for our business, the local economy or the people in our community.

From 2018 to 2022, businesses of all sizes were able to deduct the full cost of investments made in the United States in equipment and technology in the year the expense was incurred, under a policy known as “full expensing” or “bonus depreciation.” Here in Idaho, farmers could use it to buy new tractors or sprayers, semiconductor manufacturers to make upgrades to their facilities and aerospace companies to replace their fleets. This policy started to phase down by 20% a year beginning in 2023 and without action from Congress and the President, companies will lose the option to recover any portion of the up front costs of these investments entirely by 2026.

Fortunately, there is a path forward. The House of Representatives has already passed a tax bill — with the support of 357 of 435 members — that extends full expensing. Now, it’s time for the Senate to act and stand up for small- and medium-sized businesses. 

As the overwhelming support for the bill in the House shows, this is not an issue of politics. As the data shows, it’s simply smart policy. One study from Georgetown University found full expensing is associated with higher levels of both employee compensation and capital expenditures. Another assessment found the policy boosted employment and rates of investment.

Behind these data points are investments that bolster American competitiveness and strengthen our supply chains. Full expensing made it possible for telecommunications companies to build out 5G infrastructure far faster than initially forecasted. This spending benefits all industries and, indeed, anyone who uses a cell phone to check their email. Businesses have also used full expensing to build semiconductor and drug manufacturing plants, bringing critical supply chains back to the United States. And then there are small and medium-sized companies, like mine, that rely on full expensing to make the domestic investments that allow us to grow, hire more people and raise wages for our employees here at home.

Critics of full expensing say extending it is too expensive, but a new assessment from the nonpartisan Tax Foundationconcluded extending bonus depreciation would actually reduce the long-run debt-to-GDP ratio by 0.3 percentage points. In addition, the Congressional Budget Office forecasts the phaseout of full expensing will slow the nation’s economic growth.

When we invest in our small businesses, we’re also investing in our communities — and our nation’s economy. Now, we’re asking the Senate to invest in us by passing the House passed tax package that will put us all — our people, our businesses and our communities — on a path to success. 

Sam Castillo is a senior account manager at Tates Rents, an employee-owned business in Idaho. 

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