Tuesday, February 12, 2008

Free lunch program costs a lot more than advertised

Cost of Business Tax Cuts Underestimated (WSJ)
A round of business tax cuts in Congress's economic-stimulus package passed Thursday will cost nearly triple the official government estimate, tax experts said.

The tax breaks in the package will cost more than $22 billion over the next 11 years, or roughly $15 billion more than the government's long-term estimate of $7.5 billion.

The difference comes from the failure of the government to take into account the "time value of money"....

The largest business break in the package is called "accelerated depreciation,"....

In theory, the tax break provides an incentive to speed up business-equipment purchases, thus stimulating the economy.

Congress passed a nearly identical "bonus depreciation" tax break in 2002 that lasted for almost three years. most of the tax break went to companies that were planning to make purchases anyway.

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