Candice Horbacz
New analysis reveals that reforms to capital cost recovery policies are pivotal in stimulating investment across the United States economy, transforming marginal projects from unviable to attractive. A recent study, utilizing macroeconomic modeling and 15 detailed case studies, demonstrates that allowing businesses to more quickly deduct investment expenses on their tax returns significantly boosts the Internal Rate of Return (IRR) of capital projects, fostering capital deepening and creating new opportunities for businesses and workers alike. While recent legislative efforts like the One Big Beautiful Bill Act of 2025 (OBBBA) have made notable strides, the research indicates substantial untapped potential remains for further pro-growth policy adjustments.
The Economic Imperative of Investment
The sustained effort to encourage robust investment in the United States has been a consistent goal across multiple presidential administrations. From the Obama administration’s stimulus plan to the Tax Cuts and Jobs Act (TCJA) of 2017, and more recently, the Biden administration’s suite of major legislation—including the Infrastructure Investment and Jobs Act, the CHIPS and Science Act, and the Inflation Reduction Act—the underlying justification has been to stimulate domestic reinvestment, particularly within the manufacturing sector.
This bipartisan focus stems from a fundamental economic truth: investment is a primary long-run driver of economic growth and prosperity. Economic expansion fundamentally relies on three inputs: labor, capital (physical and intangible tools), and total factor productivity (TFP), which encapsulates efficiency and innovation. New investment directly enhances worker productivity through "capital deepening," equipping workers with more advanced tools
