Should the “Last-In First-Out” (LIFO) accounting method be repealed?
Background LIFO is an inventory accounting method used by companies throughout the U.S. economy to determine both book income (amount of earnings shown on business financial statements) and tax liability (amount of income tax owed to the government). It has been a fixture of the tax code since the 1930s. Repealing LIFO would force companies currently using the accounting method to report their LIFO reserves as income, resulting in a massive tax increase for large and small businesses spread across the economy. Additionally, repealing LIFO would mean potentially higher future tax bills and would make it harder for companies to manage inflation. The calls for LIFO repeal have arisen as a response to Congress’ and the Administration’s desire to address the growing federal deficit by creating “revenue raisers” (code for tax increases). Repeal of LIFO was included in House Ways and Means Chairman Charlie Rangel’s (D-NY) “Mother of All Tax Bills” in the 110th Congress. Full repeal would incr
