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Adding one thing: in the past, mega-companies spent money on tangible assets which were depreciated over time as they produced income. Now mega-companies spend
by throwaway667555 6y ago
Adding one thing: in the past, mega-companies spent money on tangible assets which were depreciated over time as they produced income. Now mega-companies spend money on intangible assets but they can expense immediately, so tax is deferred and they can grow without that tax friction. Dollars spent are the same, but expensing is accelerated, shrinking tax and unleashing growth, and the cycle continues. It’s kind of a cheat, or at least an unintended omission from old laws designed before intangible assets became the biggest assets on the planet.
- sokoloff 6y agoThose changes are often political incentives to sellers of the capital equipment. If you want to stimulate the sales of earth moving equipment or business jets, allow buyers to write it off faster. (Frankly, I’d rather encourage the sale of durable productive equipment than other types of tax incentives which stimulate less future productive activity.)
- gamblor956 6y agoNow mega-companies spend money on intangible assets but they can expense immediately, so tax is deferred and they can grow without that tax friction. Acquired intangible assets must be amortized (aka depreciation for things that don't physically exist) over 15 years, not immediately (some intangibles can be amortized over a 3-5 year time frame). And self-developed intangible assets cannot be amortized at all.
- throwaway667555 6y agoI don’t see the assets on their balance sheets? I.e, they’re being expensed. Our disagreement is about the definition of intangible asset. Under current regulations, intangible assets are understated versus reality. This is my point.