Lower business taxes should drive investment spending

By Derek Hamilton

June 11, 2025

The One Big Beautiful Bill (OBBB) is working its way through Congress via the reconciliation process, bringing a variety of business tax provisions designed to stimulate economic growth by offering substantial tax incentives for various business activities. We believe these provisions could present significant opportunities for investors.

Under current law, businesses can deduct 40% of the cost of short-lived investments, mainly equipment, in the first year. The OBBB would re-establish “bonus depreciation” starting on January 20, 2025, until 2029, allowing businesses to fully expense these investments in the same year they are made.

Currently, companies must depreciate the cost of factories over 39 years. The OBBB contains a critical provision allowing the 100% expensing of factories from 2025 to 2029 for those placed in service before 2034. This change applies to buildings and improvements for qualifying structures in manufacturing, energy and mining extraction, and agriculture.

Current law dictates businesses must amortize domestic R&D over five years. The OBBB would allow businesses to expense 100% of domestic R&D from 2025 to 2029. Crucially, this provision applies only to domestic R&D, while foreign R&D expenses would still be amortized over 15 years.

The idea of building a factory and then filling that factory with equipment should be enticing for many firms, especially given the uncertain trade environment. These provisions could provide a boost to US GDP growth, with business investment accounting for roughly 14% of GDP (chart below). As a result, we expect the positive onshoring trends to continue, resulting in an increase in the manufacturing capacity of the US.

US business investment

% of GDP

Sources: Macquarie, Macrobond, US Bureau of Economic Analysis. Shaded areas represent recessionary periods.

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