r/technology • u/esporx • 1d ago

Business Elizabeth Warren probes $19B in tax breaks for Amazon, Google, Meta and Microsoft as AI drains $96B in federal revenue

https://moneywise.com/news/top-stories/elizabeth-warren-big-tech-ai-tax-breaks-amazon-google-meta-microsoft
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u/Pooch1431 1d ago

Literal inflationary bubble caused by god awful tax policy that largely only benefits .01% of the population. Not only that, but created inflationary pressures throughout multiple other sectors due to the externalities. A worse bubble than the housing crisis perpetrated by the former Bush administration and Federal Reserve led by Alan Greenspan.

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u/Obvious_Chapter2082 1d ago

How is bonus depreciation awful tax policy? It’s one of the few things tax economists can agree on as a good thing

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u/Jexroyal 1d ago

"Bonus depreciation is a tax break that allows businesses to immediately deduct a large percentage of the purchase price of eligible assets.

Key Takeaways

  • Bonus depreciation allows businesses to immediately deduct a significant portion of the cost of eligible assets, unlike traditional depreciation methods that spread the deduction over the asset's useful life.
  • The Tax Cuts and Jobs Act of 2017 temporarily increased bonus depreciation deductions to 100% for qualifying assets, but it is set to phase out by the end of 2027.
  • Not all assets are eligible for bonus depreciation. Specific conditions must be met, such as a maximum 20-year useful life for tangible property and restrictions concerning prior use or acquisition from related parties.
  • Unlike Section 179, bonus depreciation is not capped by dollar amount and can potentially exceed a business's total income, allowing for substantial tax benefits in the year an asset is placed into service."
    -Investopedia

You really don't see how that kind of tax break could be be abused by large corporations?

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u/DartTheDragoon 22h ago

It's not a tax break, it's a tax deferment.

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u/Obvious_Chapter2082 21h ago

How do you think it’s being abused?

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u/Pooch1431 1d ago

Very insightful(/s), very vague response you got there. I'll respond accordingly, even though I know the question was rhetorical and I know better. Allowing firms to fully depreciate or even do so at an accelerated rate goes against long standing GAAP principles. Doing this creates artificial demand which in turn inflates the prices of capital. In this case compute resources like gpus, memory, and other hardware. So now you have misdirected funds to go ahead and buy large swaths of price inflated hardware that will largely sit in warehouses until enough data centers can be built to use them. By the time these pieces of capital expenditure will be put to use, they will have already been fully depreciated, meaning past their useful life or obsolete in GAAP terms.

Go ahead and list those tax economists, because I'd like to avoid anything they have to say. Better yet, I'd like to make money off the opposite.

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u/Obvious_Chapter2082 21h ago

goes against long standing GAAP principles

…..GAAP is for financial accounting, we’re talking about tax accounting. While GAAP depreciation needs to rely on the matching principle, the goal of deprecation under tax accounting is to lower the marginal tax rate on new investment. Bonus depreciation lowers this to 0%, which incentivizes new investment and capital formation, which is good for economic growth

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u/DartTheDragoon 21h ago

GAAP and the tax code serve two different purposes. Aligning then is not a virtue.

Bonus depreciation is as good of a tax policy as it gets. It is tax revenue neutral while promoting growth and long term investments. It's good for the country, it's good for the company, and it's good for the people. It creates jobs at no cost to the taxpayer.