The latest idea to be considered is to retroactively change the tax law. This could get ugly quick! In essence, if a business depreciated an asset according to the best depreciation method at the time, it would reduce the tax liability for that year and increase cash. However, there would be less depreciation deducted in later years and would make up for the lower tax revenue. What happens if you change the tax code and negate the accelerated depreciation and force business to retroactively go back and take less deductions? You immediately remove cash from the checking account. Fundamental business decisions are based first on cash flow. If you have an unexpected reduction in cash, you will table expansion plans and cut costs… immediately. On a broad scale, you basically start a recession and increase unemployment.
What are these guys thinking? Have none of them ever owned a business? These ideas communicate the desperation of the times.
The following provides a perspective of the former professions of those passing laws:
