Here is one analysis:
Companies combining deductions proposed by Obama for equipment with deductions for borrowing costs would get benefits — including refunds or credits against future taxes – – that exceed the additional income they get from new capital spending, according to a 2005 report by the Congressional Budget Office. For every $1 of additional income from new capital spending, companies may be able to get benefits worth almost $1.88, according to the budget office report.
“The combination of free deductibility of interest to make a marginal investment, combined with accelerated depreciation, would lead to negative tax rates on that new investment,” Kleinbard said.
Is that a good idea? Here is one commentator:
“It’s an invitation to arbitrage,” said Kleinbard, who now teaches tax law at the University of Southern California in Los Angeles. “You’re putting businesses in the same economic position as if you were inviting them to borrow money to buy tax-exempt bonds.”