Much of the equipment and production processes in America’s factories are decades old and not as efficient as modern equipment and processes in use by many of our international competitors. Modernizing these factories will allow them to better compete in world markets by improving product quality and reducing product costs, including through reduced energy use.
As we emerge from the Great Recession, many industrial firms have capital to invest, but a nudge from the tax code could spur substantial additional investments here in the U.S. We suggest three possible tax strategies that could spur investment but with low cost to the federal Treasury:
We recommend that at least two of these approaches be enacted. The first approach would benefit only large multinational firms, while the second and/or third approach should be included in order to benefit firms that primarily serve the domestic market. A firm would only be able to use one of the approaches.
For the commercial sector, a different approach is needed since much of capital investment is for land and buildings and not for energy-consuming systems. We suggest an option to provide accelerated depreciation for purchases of high-efficiency equipment in the commercial sector.