A $300 billion business tax break pitched as a way to boost hiring and wages had a modest effect on employment, no effect on wages and probably has accelerated the rate at which companies are able to replace workers with machines, according to a new working paper by researchers at Duke University and Grinnell College.

The tax break in question, known as bonus depreciation, allows businesses to take larger upfront write-offs on the depreciation, or expected wear and tear, of newly purchased equipment. It was introduced as part of the Job Creation and Worker Assistance Act of 2002, according to the Congressional Research Service, and was recently expanded as part of the Tax Cuts and Jobs Act of 2017.

Businesses are allowed to deduct the cost of equipment depreciation on their annual tax returns. Typically, this works out to a certain percentage of the price of a given piece of equipment each year. Bonus depreciation, however, allows a business to take some or all of that deduction upfront, in the year the equipment is purchased, rather than staggering it out over time.

The Tax Cuts and Jobs Act, for instance, allows businesses to deduct the full price of a piece of equipment in the year it is purchased. To use a $100,000 truck as an example, without bonus depreciation a business purchasing that truck would deduct its value over a period of six years, reflecting the depreciation in the truck’s value. Under the TCJA, the business can deduct the full $100,000 purchase price right away.

Bonus depreciation is often pitched as a way to spur business investment, which in turn will create jobs and raise wages. That promise is baked into the titles of the bills, such as the Job Creation and Worker Assistance Act of 2002, that have created or modified the tax break over the years. Similarly, a 2017 analysis by the White House’s Council of Economic Advisers predicts that lowering the corporate tax rate and allowing businesses to deduct the full price of equipment purchases upfront "will result in higher worker wages as a result of changes in worker productivity that result from increased capital investment.”

The new study examines the effects of bonus depreciation from 2002 through 2012, primarily by comparing labor market conditions in counties with different levels of exposure to the tax break. The study finds that some of the benefit of the tax break did indeed trickle down to workers: Over the 10-year period, it created 5.65 million jobs relative to the baseline level of employment in 2001.

But this increased employment came at a steep cost to taxpayers. Pricing in the $297 billion cost of the tax break during that period, according to the paper’s analysis, it works out to roughly $53,000 per job. Other research has shown that government spending typically boosts employment at a cost of only $30,000 per job.

“While bonus depreciation had measurable effects on the labor market, our results suggest that tax cuts to corporations are not the most cost-effective forms of stimulus,” the authors write.

Beyond that, the study finds that the tax break appears to have slightly decreased worker pay in the counties most exposed to it.

The authors attribute this finding in part to the effects of automation: The tax break made it cheaper for companies to invest in equipment, such as automated checkout machines, that replaces workers. “As many jobs lost to automation were well-paid jobs in production, administration, and sales, the rapid decline in these county sub-sectors likely explains some of the later-period declines in compensation and compensation per worker,” they write.

That relates to the final key finding. The paper’s results strongly suggest that, on net, businesses’ equipment investments aren’t helping workers become more productive but rather replacing the workers entirely. Because the cost of investing in new equipment is reduced by the bonus depreciation tax break, it makes it more affordable for businesses to shift to new production technologies that rely on machines rather than human labor.

“If you believe that the market is doing things correctly,” Juan Carlos Suárez Serrato, one of the study’s co-authors, said in an interview, “the rate at which we invest in these things should not be accelerated artificially.” An accelerated shift toward machine labor also has troubling implications for economic inequality: “If you have more machines and fewer workers, there’s going to be more inequality going toward people who own the machines, and not to the people who use them.”

Chuck Marr, director of federal tax policy at the Center on Budget and Policy Priorities, a progressive think tank, said in an interview that the study is a “reality check” on “all these promises that were made that bonus depreciation would lead to all these huge wage gains. ... It shows that this is not an adequate response to wage stagnation.”

Because the Tax Cuts and Jobs Act expands the bonus depreciation tax break to 100 percent until 2023, Marr said these findings underscore how that bill “was heavily, heavily loaded toward providing tax cuts for shareholders and very wealthy people,” rather than toward “working-class people who struggle.”

Not all analysts are as skeptical of the merits of bonus depreciation. Erica D. York, an analyst at the conservative Tax Foundation, pointed out Congress frequently changed the contours of the bonus depreciation tax break during the study period, making it difficult to isolate what the long-term effects of a consistent policy would be.

“Expensing has been on again, off again, scheduled to expire, extended, and changed here and there since it was first enacted in 2002,” she said via email. “If expensing is temporary, companies may be shifting the timing of their investments, which may change the capital to labor ratio temporarily without leading to a change in productivity.”

Suárez Serrato and his co-authors conclude that their findings are a cautionary tale for policymakers looking to juice hiring and wages by making it easier for corporations to invest in equipment. “Incentives for capital accumulation in the TCJA will likely have small effects on employment and wage growth and may induce investment in labor-replacing capital. Policy makers looking to stimulate labor markets with these tax incentives for capital accumulation should proceed with extreme caution.”