The government's economic stimulus package will provide nearly $50 billion in business tax cuts and could jump-start company investment in bricks, mortar and equipment, local business leaders said Thursday.
"I'm pleasantly surprised," said Lee Taddonio, president of SMC Business Councils, a Churchill-based trade group that represents some 5,000 companies in Western Pennsylvania.
"To get companies to actually invest in equipment is a much better way to stimulate the economy than just handing out checks."
The Job Creation Economic Stimulus Act of 2008 includes a provision for first-year expensing of all so-called high-tech machinery and equipment defined as "high productivity property." Under the bill, the entire cost can be deducted in the year in which it's put in service.
"I like the part about first-year expensing," said Linda Froelich, co-owner with her husband, Richard, of Ace Wire Spring & Form Co., a 69-year-old McKees Rocks spring and specialty wire forms maker. "Anytime we can invest in high-tech equipment, plus get help to do so, we do it. This definitely would help us."
A key is the legislation's definition of "high productivity property." In addition to computer hardware and software, the bill includes a broad range of advanced applied technologies that today are used in the laboratory, in telecommunications and on the factory floor.
The bill allows a 50 percent bonus depreciation for other equipment the year it is placed in service. For both provisions, property purchased and placed in service before Jan. 1, 2009, is eligible.
"The provision I'm bullish about is the one that allows business to immediately write off 50 percent of the purchase of certain capital equipment. It also appears there may be a net loss carry back of five years," said Mark Cobetto, a shareholder in the tax group for Schneider Downs, a Downtown accounting firm. "Both of those provisions are ones we have had in the past that have expired."
"I think both initiatives will induce the manufacturing sector to invest in equipment," said Petra Mitchell, president of Catalyst Connection, an organization aligned with the Pittsburgh Technology Council that provides manufacturing assistance and serves as a link for small- to mid-sized manufacturers to new technology and processes.
"If you look back in history, the bonus depreciation concept was used after 9/11. It sparked a kind of economic boom as it related to manufacturing," said James Cunningham, a shareholder with Downtown accounting firm Alpern Rosenthal.
"By providing expensing for entrepreneurs and accelerated bonus depreciation for employers, this plan will give American companies the shot in the arm they need to continue to grow the economy and create new jobs," said U.S. Rep. Phil English, R-Erie, in a statement.
"I think the ideas are good. A good way to stimulate corporate investment is through rapid write-offs," said Jake Haulk, an economist and president of the Allegheny Institute for Public Policy in Castle Shannon.
"I don't like the one-year limit," Haulk said. "There's a chance for companies to pile up investment in 2008 and leave little for 2009. Rather than a drop-dead date of Jan. 1, perhaps they should have phased out the provisions."
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