Stimulus Agreement
Politics, Tax January 24th, 2008
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In what must be the quickest agreement in the history of Congress, Democrats and Republicans agreed on a stimulus plan. It includes business and personal tax incentives.
That scream you hear? It’s state tax departments all over the country. The business stimulus includes bonus depreciation, similar to what was done after 9.11. The problem is that about 30 states didn’t follow the Federal rules the first time. Some states simply said “pretend that bonus never existed”. Those states are okay. Some states said “add back X percent of your bonus depreciation and deduct it over X years beginning in year X”. Okay, that’s easy enough. But then you had states like Illinois and Pennsylvania that had this massively complicated system to reverse the bonus depreciation and take it during the life of the asset (apparently they didn’t think of the first way). Then, there were states like Iowa, Missouri, and New York that didn’t follow the Federal rules for certain years but did for other years. Oh, and New York City didn’t follow the Federal rules except for assets that were physically located in New York City.
Oh, the humanity! I’d like to think that given a second bite at the apple that states would get it right this time. I’m guessing we’ll get a second round of adjustments that are a mish-mash similar to the first time around.
I think we’ll be okay if Congress simply adjusts the Tax Code to reuse the same paragraph as the original bonus depreciation. Most states referenced that specific paragraph in the Code and said “we don’t like it” (which is why most states didn’t bother to adjust for the Hurricane Zone bonus depreciation, it’s in another section of the Code). But, now I’m betting that state legislatures *and* Congress get it right. I might as well be betting on the Cubs to win the World Series next year.
It’s job security, right? Right?