John Kerry: “today Senator Smith and I are introducing the Tax Depreciation, Modernization, and Simplification Act of 2005. Last…”

“today Senator Smith and I are introducing the Tax Depreciation, Modernization, and Simplification Act of 2005. Last July, the Senate Finance Subcommittee on Long-Term Growth and Debt Reduction, on which Senator Smith is chairman and I am ranking member, held a hearing on updating our depreciation system. During the hearing, we heard that the current depreciation system is out of date and that changes should be made. Our tax system allows, as a current expense, a depreciation deduction that represents a reasonable allowance for the exhaustion, wear and tear of property used, or of property held for the production of income. Since 1981, the depreciation deduction for most tangible property has been under rules specified in section 168 of the Internal Revenue Code. The Modified Accelerated Cost Recovery System, or MACRS, specified under section 168 applies to most new investment in tangible property. MACRS depreciation allowances are computed by determining a recovery period called a class life and an applicable recovery method for each asset. The current depreciation system has not kept pace with technological advances. Several industries were not even contemplated when class lives were assigned in 1981, and some class lives even date back to 1962. In the 1980s it would have been difficult to imagine what our reliance on computer and wireless technology would be today.…”