taxationI am about to meet with my Congressman to suggest a very simple piece of legislation - namely that assets used for telecommuting should be depreciated at a faster rate. It is this accelerated depreciation that is the root cause of the cubicle, for instance. Because businesses can more quickly depreciate assets, they are able to realize tax gains more quickly, and sincer there is a time cost of money, make more profit. I’m going to ask my Congressman to insert a provision in the tax code that would allow any asset used by telecommuters (I have a definition) to be accelerated at faster rate (the tax code divides assets into classes, I’m just going to suggest “class - 1”). This would hopefully encourage employers to allow telecommute, without forcing the issue.
In talking to my Congressman, however, I want to make the point that over a 10 year budget cycle, this proposal is effectively revenue neutral. (Yes, you’d get some spillage for assets depreciated over a period longer than 10 years, but you get the idea.)
Assuming, for example, that a $100 asset is taxed at 10%, I’m thinking that the total amount of tax collected on the asset is the same over the course of 10 years, regardless of whether it is depreciated over 5 years or 3. - its just that with an accelerated depreciation, the tax is paid more quickly.
Ideally, I’d love to see a worked example that proves the point
Ignoring the time cost of money for the collected revenue (since the government doesn’t invest the revenue), am I right? Does depreciation just affect the rate at which tax is collected, but leaving the whole amount the same?
I think you are correct, given that a company’s marginal tax rate remains unchanged over the 10 years span. You could envision some endogeneity in capital investments, though, wherein a company would opportunistically invest in short-lived assets during years when their marginal tax rate is high, and postpone short-lived capital expenditures during years of low marginal tax rates. But, I’m not sure that the amounts we’re discussing are material. The important question for your recommendation is behavioral: would companies actually substitute away from office space were this policy to go into effect?
You may want to hand wave over the “revenue neutral” defense (as it’s plausible) and go with other positive externalities of a work-at-home workforce: less traffic on roads, reducing childcare expenses, marital harmony, attracting a younger workforce, etc. Just some thoughts.
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