Washington – President Barack Obama on Wednesday will propose $300 billion in accelerated or expanded tax breaks for business, a jolt of cash that he says would jump-start hiring and help revive the nation’s economy.
Speaking in Cleveland, Obama will ask Congress to send $200 billion in tax cuts to businesses by allowing them to write off more of their costs through 2011. He’ll also propose expanding and making permanent a tax credit for research and development. That would cost $100 billion over 10 years.
The proposals are part of Obama’s weeklong pitch to show the country that he’s aggressively pushing new and recycled proposals to help create jobs. On Monday, he proposed $50 billion in quick federal spending to repair roads, railways and runways. On Friday, he plans a White House news conference, very likely to include questions about the economy.
His Democratic Party faces potentially big losses in November’s elections for control of Congress, driven by voters’ worries about the economy.
Prospects that Congress will enact Obama’s proposals before November’s elections are slim. Republican congressional leaders dismissed the president’s $50 billion plan to rebuild U.S. infrastructure as wasteful spending that would increase federal budget deficits. Their opposition, combined with centrist Democrats’ worry that the rising deficits are alarming voters, makes it unlikely that Congress will approve these plans before the elections.
A senior administration official said that Obama would use the Ohio speech not only to spell out the new tax proposals but also to draw a contrast between the Democratic agenda and the economic policies of Republicans, particularly Rep. John Boehner of Ohio, the Republican leader in the House of Representatives.
“We’re obviously now in a very political period,” said the official, who spoke only on the condition of anonymity under White House ground rules. “It’s a propitious thing that we should be in Cleveland, where Mr. Boehner was a few weeks ago outlining what he said was the Republican economic vision.”
The president will propose increasing and accelerating a tax cut for businesses to pump $200 billion into their accounts over the next 15 months. The proposal would allow businesses to deduct 100 percent of the cost of U.S.-made equipment — up from 50 percent — and write off that cost immediately rather than over a multi-year period.
White House aides predicted that 1.5 million corporations and “several million” individuals could take advantage of the proposal. They would, however, lose the ability to write off the cost of that equipment in later years, essentially increasing the government’s tax collections later, “when the economy is stronger.”
The net cost to the Treasury would be $30 billion, Obama aides said. That and the other costs would be offset by closing corporate tax loopholes.
“This measure would provide tax incentives for businesses to invest in the United States when our economy needs it most, which both should create jobs now and expand the capital stock to support future growth,” a White House memo said. “This unprecedented step would be the largest temporary investment incentive in American history.”
Obama also will urge Congress to restore and make permanent the Research and Experimentation Tax Credit for research done in the United States.
First created as a temporary measure in the Economic Recovery Tax Act of 1981, the tax credit has been extended repeatedly for short periods, most recently as part of the Emergency Economic Stabilization Act of 2008. It expired at the end of last year.
Obama proposed making it permanent in February as part of his budget proposal, saying at the time that it would cost $70.5 billion over 10 years. Expanding the credit would increase the 10-year cost to $100 billion, aides said.
“This is a win-win, encouraging job growth and investment now that will pay off with stronger economic growth in the future,” the White House memo said.