Revenues
Repeal the Deduction for Domestic Production Activities
CBO periodically issues a compendium of policy options (called Options for Reducing the Deficit) covering a broad range of issues, as well as separate reports that include options for changing federal tax and spending policies in particular areas. This option appears in one of those publications. The options are derived from many sources and reflect a range of possibilities. For each option, CBO presents an estimate of its effects on the budget but makes no recommendations. Inclusion or exclusion of any particular option does not imply an endorsement or rejection by CBO.
| Billions of dollars | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | 2015-2019 | 2015-2024 |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Change in Revenues | 8 | 19 | 19 | 19 | 20 | 20 | 21 | 21 | 22 | 22 | 85 | 190 |
Source: Staff of the Joint Committee on Taxation.
Note: This option would take effect in January 2015. Estimates are relative to CBO’s April 2014 baseline projections.
Businesses are allowed to deduct from their taxable income a percentage of what they earn from qualified domestic production activities. Various activities qualify for the deduction:
- Lease, rental, sale, exchange, or other disposition of tangible personal property, computer software, or sound recordings, if they are manufactured, produced, grown, or extracted in whole or significant part in the United States;
- Production of films (other than those that are sexually explicit);
- Production of electricity, natural gas, or potable water;
- Construction or renovation of real property; and
- Performance of engineering or architectural services.
The list of qualified activities specifically excludes the sale of food or beverages prepared at retail establishments; the transmission or distribution of electricity, natural gas, or potable water; and many activities that would otherwise qualify except that the proceeds come from sales to a related business.
This option would repeal the deduction for domestic production activities.