(January 25, 2002)
WASHINGTON -- The U.S. Senate today rejected a three-year depreciation bonus as part of an economic stimulus package, but high-tech industry groups said the Republican-backed measure is needed to encourage computer and application purchases by businesses.
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The proposal, offered by U.S. Sen. Gordon Smith (R-Ore.), would have offered a 30% depreciation bonus. The measure was defeated by a vote of 45 to 39.
Following the defeat, Smith immediately introduced a new amendment seeking a two-year depreciation bonus. No action was taken on that measure immediately.
The bonus would work this way: If a computer costs $1,000, the purchaser would be able to write off a bonus 30% of the cost in the first year, or $300, plus 20% (the normal depreciation spread over five years) of the remaining $700.
Although the failure of Smith's proposal is a setback, it's not the end of efforts to get a depreciation bonus approved.
Senate Majority Leader Tom Daschle (D-S.D.) this month said he would back an accelerated depreciation plan, but it would be limited to one year and would be retroactive to last September.
Supporters of the original depreciation bill are hopeful the two-year version will win passage: "I think it was an attempt to meet [the Democrats] halfway," said a spokesman for Smith.
Technology industry trade groups said they're worried that a short-term depreciation bonus will have the same impact that zero percent financing had on automobile makers.
"You get that huge jump in sales and then you fall off the cliff," said Harris Miller, president of the Information Technology Association of America in Arlington, Va. "That's why we are pushing for that longer period of time."
The Daschle depreciation proposal doesn't give companies enough time to take advantage of it, said Robert Cresanti, vice president of public policy at the Business Software Alliance. "A period of less than a year is just not a reasonable length of time for companies to plan," said Cresanti.
The U.S. House last year approved a three-year, 30% depreciation bonus.