While You Tighten Your Belt, Corporations Get a $16B Windfall

Major US corporations have secured a $16 billion (£12.6bn) tax windfall thanks to a retroactive clause in the newly enacted 'One Big Beautiful Bill Act' (OBBBA). The provision allows companies to claim tax breaks for investments made months before the legislation was even signed into law. Essentially, this means they are being reimbursed for money they had already spent as far back as January 2025.

This payout comes at a time when millions of households are tightening their belts to cope with persistent inflation. While the policy—commonly known as 'bonus depreciation'—is designed to encourage new investment, experts warn that applying it retroactively creates no real economic incentive. The Joint Committee on Taxation (JCT) confirms it functions as a cash transfer for decisions made last winter, further widening the divide between public austerity and private excess.

The Loophole Exposed

The mechanics of this windfall hinge on a specific adjustment to the tax code surrounding bonus depreciation. Normally, when a company purchases assets such as delivery trucks or data servers, they deduct the cost gradually over several years. However, the new rule allows them to write off 100% of the purchase price immediately, significantly reducing their tax bill for that year.

The controversy lies in the timing. The OBBBA makes this benefit retroactive to any equipment placed in service after 19 January 2025—months before the bill officially became law on 4 July 2025. For example, a tech giant that upgraded its data centres in February expecting a standard tax bill can now wipe those costs off its ledger entirely.

Who Really Benefits?

Despite claims that the policy supports small businesses, the data paints a different picture. According to JCT analysis, 82% of bonus depreciation benefits claimed by corporations flowed to large firms with over $1 billion in gross receipts. Meanwhile, companies earning under $10 million claimed less than 1% of the total.

This concentration of wealth effectively makes the tax break a subsidy for the largest players in the economy. Tech giants like Google and Facebook—companies with the capital to make substantial upfront investments—capture most of the relief. Conversely, most small businesses see little benefit, as they could already deduct investment costs under existing Section 179 rules.

The Economic Rationale and Its Flaws

Proponents argue that 100% bonus depreciation is vital for economic growth. The Tax Foundation claims that full expensing increases long-term GDP by 0.4% and creates approximately 87,000 full-time jobs by lowering the cost of capital. They argue that without such incentives, businesses would delay modernising their fleets or factories, slowing productivity growth.

However, this rationale falters when applied retroactively. As the Congressional Research Service (CRS) notes, a tax cut cannot incentivise decisions that have already been made. By covering purchases dating back to January, the law functions as a reward for past behaviour rather than a catalyst for future investment. It essentially pays corporations for investments they would have made anyway, resulting in deadweight loss for taxpayers.

The Cost and Future Implications

The cost of this retroactive generosity is substantial. The Joint Committee on Taxation estimates that extending bonus depreciation permanently will cost around $362.7 billion over the next decade. As the federal deficit continues to grow, these billions will ultimately be paid through higher taxes or cuts to public services. While corporations enjoy their $16 billion retroactive windfall today, the American public is effectively taking out a loan that will need to be repaid with interest.