Now who is forgetting their fundamentals of business? That is only going to happen after things have bottomed and the only way to go is up. That isn't case right now. They are trying to avoid the hard bottom because it is way down there...
I have been the guy who taxpayers come to for advice and in most cases, to make the decision for them.
I can tell you that if there is a good shot of business coming back within a reasonable time frame, business people know they are going to need another backhoe or another press or whatever, and they'll spend the money. Competent business people are looking for opportunities to expand cost-effectively.
It is true that many won't buy equipment now. But if you have a guy whose business is still pretty good, who needs another piece of equipment, when you tell him he can get a 10% CREDIT against his taxes for buying that equipment now versus later, he will do it.
IF you have a piece of equipment that cost $100K and the credit is $10K, then he may save 10K on his taxes before he forks over a NICKEL for that equipment. It is a huge incentive, and it can be particularly effective if there is a sunset provision. The same concept applies to bonus depreciation (e.g., IRC 179) as well as more complex rules like interest capitalization rules, etc.
Tax incentives are powerful when done properly. I've seen it in real life. I seriously doubt you have or you would have a different view.
While I would never recommend someone enter into solely tax-motivated transactions without business fundamentals in place, tax incentives can make a huge difference in a decision whether to buy a piece of equipement.
As I've sat here today and worked up perhaps 6 quotes, the last paragraph in each and every one points out that the net cost of the system, after taxes, is half what they're paying us -- and that is a very powerful incentive for these people to move forward. |
