The Corner


Taxes and Manufacturing

To Alex’s very interesting “Capital Matters” column on corporate-tax-depreciation reform — and don’t roll your eyes; it is an interesting subject, if you let it be — I would add only this: Tax schedules pushing 30 or 40 years might (might) have made sense in some earlier, slower-moving capitalist era, but, in our time, businesses undergo major reorganizations much more frequently, and few of them are making 39-year plans for any asset. It is possible that almost none of the equipment Tesla is purchasing today to manufacture automobiles will be in use a decade hence.

(There used to be a joke among technology investors that you should dump a company’s stock the minute it announces it is building a headquarters; Apple provides a counterexample.)

The tax rules are, as Alex shows, a hairier problem for firms that make big investments in physical equipment, factories, etc., than they are for, say, software companies that mostly need office space and personnel. The tax rules are not the only reason U.S. manufacturers have not seen the kind of growth that tech and finance have seen, but improving them would improve the overall business climate, which is in the interest of manufacturers — and everybody else.


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