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Incentive effects of bonus depreciation

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  • Hulse, David S.
  • Livingstone, Jane R.

Abstract

This study examines the effect on capital expenditures of "bonus depreciation," which was intended to stimulate such spending by allowing businesses to immediately expense a portion of the cost of qualified capital expenditures from late 2001 through 2004. After controlling for many previously documented determinants of capital expenditures, some of our results indicate that capital expenditures during bonus depreciation's availability were greater than those during the time it was not available, consistent with the expected effect. However, other results indicate that bonus depreciation had an insignificant effect on capital expenditures. These mixed findings generally persist through several sensitivity analyses. We interpret these results as weakly supportive evidence that Congress attained its goal of stimulating capital spending.

Suggested Citation

  • Hulse, David S. & Livingstone, Jane R., 2010. "Incentive effects of bonus depreciation," Journal of Accounting and Public Policy, Elsevier, vol. 29(6), pages 578-603, November.
    • Handle: RePEc:eee:jappol:v:29:y::i:6:p:578-603
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    Citations

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    Cited by:

    1. Laura Dobbins & Martin Jacob, 2016. "Do corporate tax cuts increase investments?," Accounting and Business Research, Taylor & Francis Journals, vol. 46(7), pages 731-759, November.
    2. Sebastian Eichfelder & Kerstin Schneider, 2014. "Tax Incentives and Business Investment: Evidence from German Bonus Depreciation," CESifo Working Paper Series 4805, CESifo.
    3. Hagen Ackermann & Martin Fochmann & Nadja Wolf, 2016. "The Effect of Straight-Line and Accelerated Depreciation Rules on Risky Investment Decisions—An Experimental Study," IJFS, MDPI, vol. 4(4), pages 1-26, October.
    4. Eichfelder, Sebastian & Schneider, Kerstin, 2018. "How do tax incentives affect business investment? Evidence from German bonus depreciation," arqus Discussion Papers in Quantitative Tax Research 231, arqus - Arbeitskreis Quantitative Steuerlehre.
    5. Bawa, Siraj G. & Williamson, James M., 2017. "Tax Reform and Farm Households," 2018 Allied Social Sciences Association (ASSA) Annual Meeting, January 5-7, 2018, Philadelphia, Pennsylvania 266294, Agricultural and Applied Economics Association.
    6. Ackermann, Hagen, 2015. "How does the type of subsidization affect investments: Experimental evidence," arqus Discussion Papers in Quantitative Tax Research 185, arqus - Arbeitskreis Quantitative Steuerlehre.
    7. Eichfelder, Sebastian & Knaisch, Jonas & Schneider, Kerstin, 2023. "How does bonus depreciation affect real investment? Effect size, asset structure, and tax planning," arqus Discussion Papers in Quantitative Tax Research 278, arqus - Arbeitskreis Quantitative Steuerlehre.
    8. Brandstetter, Laura & Jacob, Martin, 2013. "Do corporate tax cuts increase investments?," arqus Discussion Papers in Quantitative Tax Research 153, arqus - Arbeitskreis Quantitative Steuerlehre.
    9. Zeng, Jing & Dai, Fangjie & Chan, Kam C., 2023. "The impact of an accelerated depreciation tax policy on employment: Evidence from China," Journal of Asian Economics, Elsevier, vol. 86(C).
    10. Estian Calitz & Eva Muwanga-Zake & Alexius Sithole & Wynnona Steyn, 2021. "Depreciation allowances in South Africa," Studies in Economics and Econometrics, Taylor & Francis Journals, vol. 45(1), pages 1-22, January.

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