Every year, the Legislature passes a tax conformity bill to keep Maine law in conformity with the Federal tax code. This year, one of the provisions that the Federal Government adopted was to extend so-called "Bonus Depreciation", which allows companies to accelerate the depreciation on equipment that they purchase - if done as a one-time measure at the start of a year, there is an argument that businesses thinking about buying equipment will be moved to do so, thereby stimulating the economy. But like "tax amnesty" plans these things don't work as stimulus if they take place year after year. This year, the Federal government extended bonus depreciation right around Christmas - at a time when any purchases made in 2014 would have already occurred.
So when it came time to conform Maine to Federal law, a bonus depreciation component was added to the bill. We explored a number of ideas to use the cost of this piece (around $10,000,000) to accomplish something else, such as property tax relief or early childhood education, but we counted and did not have the votes to accomplish that.
I don't think the Federal Government providing a post-facto "incentive" of this sort accomplishes much of anything, It's a dumb policy.
That said it's not a policy that benefits just giant corporations, which is how it has been characterized. Indeed, it will provide accelerated depreciation for equipment purchases for more than 4000 Maine businesses, the vast majority of which are small businesses, many of which are sole proprietors, and a lot of whom are in Portland. I'm sure it benefits big business too, but as I looked at the list of distribution of payees, they were not the bulk of the beneficiaries.
It's also worth noting that because this is a depreciation schedule change, it's money that will come to the state anyway - on a different schedule. True this provides a sort of no-interest loan to these businesses, but it's worth noting that our revenues this year are up by about $5m thanks to Bonus depreciation granted in years past. It does not make this less of a stupid policy, but it's not quite the giveaway that opponents have described it as.
For that reason, I supported the conformity bill (with my nose held around the bonus depreciation issue) AND in recognition of the fact that there are other provisions in the bill that benefit schoolteachers who use out of pocket funds for their classrooms, mortgage holders, and other small businesses. If the whole tax conformity bill went down because of the bonus depreciation issue it would have been a disaster.
So when it came time to conform Maine to Federal law, a bonus depreciation component was added to the bill. We explored a number of ideas to use the cost of this piece (around $10,000,000) to accomplish something else, such as property tax relief or early childhood education, but we counted and did not have the votes to accomplish that.
I don't think the Federal Government providing a post-facto "incentive" of this sort accomplishes much of anything, It's a dumb policy.
That said it's not a policy that benefits just giant corporations, which is how it has been characterized. Indeed, it will provide accelerated depreciation for equipment purchases for more than 4000 Maine businesses, the vast majority of which are small businesses, many of which are sole proprietors, and a lot of whom are in Portland. I'm sure it benefits big business too, but as I looked at the list of distribution of payees, they were not the bulk of the beneficiaries.
It's also worth noting that because this is a depreciation schedule change, it's money that will come to the state anyway - on a different schedule. True this provides a sort of no-interest loan to these businesses, but it's worth noting that our revenues this year are up by about $5m thanks to Bonus depreciation granted in years past. It does not make this less of a stupid policy, but it's not quite the giveaway that opponents have described it as.
For that reason, I supported the conformity bill (with my nose held around the bonus depreciation issue) AND in recognition of the fact that there are other provisions in the bill that benefit schoolteachers who use out of pocket funds for their classrooms, mortgage holders, and other small businesses. If the whole tax conformity bill went down because of the bonus depreciation issue it would have been a disaster.
RSS Feed
