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If we could purchase a car/computer as an expense, then we could make that decision now and not worry about paying for it for years to come.

For a business there is a difference between cash flow and tax profit/loss calculations. If you buy a $50,000 car, it is listed on your balance sheet as an asset and it goes down in value over time on the balance sheet. During that time, you are hopefully getting more value from the car than the amount of asset you are losing. From a cash flow point of view you spent the money when you bought it. The money needed to be in your checking account. But, your company is not allowed to "expense" (write-off) the car as a business expense all in that first year because it still has value on your asset sheet.

The idea is to show the profitability of your company more accurately. You end up getting to write-off the entire $50,000 from your profit, but you do it a little bit each year.

One of the provisions of the Bush 2001 and 2002 tax bills was the ability to accelerate depreceiation on business purchases (to allow you to capture the business costs sooner and encourage people to buy things for their business and stimulate the economy. And it worked.

Hope this helps. I just tell my accountant each year what I spent on capital expenses and when they were put into service, and he sticks them in the software and it spits out the proper depreciation on the corporate tax returns.

"For a business there is a difference between cash flow and tax profit/loss calculations"

This is where I'm confused. I understand the need for depreciation under the current tax system. Heck, I just found the 112 page IRS document that talks about. Didn't read it though :)

I'm an engineer, so I don't understand all this junk. Never did. I used to work for a small manufacturing company and the owner didn't understand either. He just paid cash for a piece of equipment. Now, he has to charge his company for the next 7 years on that piece of equipment.

How does this work under the FairTax? The only need for depreciation at that point would be for the net worth of the business, i.e. its value on the stock market. Like I said earlier, about 1/7th of our capital budget is just for depreciation. That is just for one location.

We currently have about 30 plants in the U.S. Since we won't have to depreciate our property against our income, we can lower prices, make more profit.

It could encourage us to build/expand more plants since it would be a one time cash expense. Instead of building in Romania or Mexico, we could expand here.