Representatives Pat Tiberi (R–OH) and Ron Kind (D–WI), both Ways and Means Committee members, have introduced the America’s Small Business Tax Relief Act of 2014 (H.R. 4457).

This legislation would make permanent section 179 expensing and allow businesses to deduct up to $500,000 annually in expenses incurred buying machinery, equipment, computer software, and similar items. The Obama Administration has made a similar proposal to permanently extend the section 179 deduction at the $500,000 level.

In principle, all business expenses, including capital expenses, should be deductible in the year that they are incurred to prevent a tax bias against investment. H.R. 4457 is an important step in the right direction that would simplify small firms’ tax returns, reduce compliance costs, reduce their cost of capital, and aid their cash flow. By setting the section 179 limit permanently at $500,000, it also reduces the uncertainty that hinders small firms’ ability to plan their investments.

Section 179 has been in the tax law since 1958. The amount that could be deducted has varied considerably. For 2010, 2011, 2012, and 2013, the dollar limitation was $500,000. In 2014, in the absence of legislative action, the maximum amount a business may deduct will fall to only $25,000. This will have a substantial adverse impact on small businesses.

Senate Finance Committee chairman Ron Wyden (D–OR) has also proposed setting the section 179 limit at $500,000—but only for 2014 and 2015. House Ways and Means Committee chairman Dave Camp (R–MI), in his tax reform discussion draft, proposed setting the limit permanently at $250,000.

Many tax provisions expired at the end of last year. As my colleague Curtis Dubay recent noted in his Issue BriefTax Extenders an Opportunity to Improve the Tax Code,” section 179 is one of the relatively few that deserve to be extended. There are none more important to small businesses.