Final answer:
Companies use accelerated depreciation to reduce taxable income and lower taxes in the short term, which can improve cash flow but may affect long-term capital accumulation and living standards.
Step-by-step explanation:
Many companies use accelerated depreciation for tax purposes because it results in lower taxes in the short term. Accelerated depreciation methods, like the double declining balance method, allow companies to write off a larger portion of an asset's value in the first few years after purchase. This front-loaded depreciation expense reduces taxable income during these early years, thereby reducing the amount of tax a company owes during this period. While it does offer short-term tax relief, it can lead to higher taxes later when the depreciation expense is smaller. This strategy is popular as it can improve a company's short-term cash flow, allowing them to reinvest in technology or other assets that might increase efficiency and potentially avoid future taxes.
However, there are long-term consequences of such tax strategies. As the provided reference states, while tax cuts or strategies like accelerated depreciation can stimulate aggregate demand and output in the short term, they may also reduce national savings, potentially hindering the accumulation of a country's capital stock and affecting future living standards.