GOP senators offering bill to cement business provision in Trump tax law

Sen. Pat Toomey (R-Pa.) on Thursday is introducing legislation to make permanent a policy in President Trump’s tax-cut law aimed at boosting business investment.

The bill would permanently extend a portion of the tax law that allows businesses to immediately write off the full costs of certain investments, which is commonly referred to as “full expensing.” This provision is currently slated to start to phase out after 2022.

Supporters of the GOP tax law argue that full expensing is one of the provisions in the measure that is the most beneficial for economic growth, and that making the policy permanent would help the economy. They argue that full expensing allows businesses to deduct the cost of investments at the time businesses pay for them.

“My bill to make full expensing permanent would give manufacturers and businesses of all sizes certainty around investment planning and it would keep our economy humming,” Toomey said in a statement.

A fact sheet from Toomey’s office pointed to a 2018 estimate from the right-leaning Tax Foundation that making the provision permanent would increase long-run gross domestic product (GDP) by 0.9 percent. 

Toomey previewed his plans to introduce his bill during a Senate Finance Committee hearing on Wednesday, during which Treasury Secretary Steven Mnuchin testified. Mnuchin said during the hearing that he agreed with Toomey that making full expensing permanent would be good for the economy.

Toomey’s bill is co-sponsored by several other Republicans — including Sens. Rob Portman (Ohio) and Tim Scott (S.C.), who along with Toomey played key roles in drafting the 2017 tax law.

But some progressives have criticized full expensing, arguing that it’s ineffective at boosting investment. Sen. Elizabeth Warren (D-Mass.) proposed doing away with full expensing in her presidential campaign proposal for financing “Medicare for All,” instead calling for businesses to be able to write off their investments “in a way that more accurately reflects the actual loss in value.”

The bill also would fix an issue with the GOP tax law that is preventing retailers and restaurants from being able to immediately write off the costs of their renovations. While the authors of the tax law intended for retailers and restaurants to be able to immediately expense the costs of their improvements, as a result of an apparent drafting error, these businesses have to write off the costs of their renovations over 39 years instead.

Mnuchin said that both Republicans and Democrats acknowledge that the retail issue was a “drafting mistake,” and that Treasury doesn’t have the ability to fix it through regulations.

“This should not be a Democrat or Republican issue,” Mnuchin said.

Stand-alone legislation that Toomey offered last year to fix the retail issue has bipartisan support. But key congressional Democrats have said they don’t want to make technical fixes to the GOP tax law without also making more substantive changes to the tax code.

—Updated at 11:26 a.m.