President Obama is proposing some new tax breaks he hopes will encourage businesses to expand and get the economy moving again. The President is set to unveil the tax breaks along with a plan for $50 billion worth of infrastructure investment in a speech about the economy on Wednesday, but some details about the tax breaks are already being reported.
One proposed tax break that's receiving a lot of attention, would allow business to write off 100 percent of new capital investments, money spent on plants and equipment, through 2011. Companies can already deduct these expenses, but currently they have to wait longer to do so. Allowing businesses to take the deduction upfront, will mean they have more cash on hand to spend or invest. Economists at the White House estimate that the plan would cut business taxes by around $200 billion over two years.
The President is also going to propose increasing and making permanent tax credits for research and development. The research tax credit is typically extended by Congress year after year, but some gaps have left business groups frustrated.
Laura Tyson, a member of the president's economic recovery advisory board, spoke about the proposed extension on CBS's "Face The Nation" this weekend.
...I don't think this is something that has an immediate - as immediate a job impact as, say, movement on the current tax credits for the unemployed or extending a payroll tax holiday of some sort," she continued. "But I think it's very important in terms of job creation over the longer term. So if we're thinking about growth and long-term good jobs, research is important."
Administration officials estimate that making the tax credit permanent would cost around $100 billion over the next decade.
President Obama's call for expanding tax cuts for businesses, comes as he is facing criticism for not extending another set of tax cuts, those for the top two percent of income earners. In an interview with the WSJ, Bill Rys, tax counsel for the National Federation of Independent Business, a small-business group, said the expiration of these cuts is a higher priority for many in his community.
The best thing to do is to get rid of uncertainty, and that includes the cliff we're falling off with all these [tax] provisions that are expiring.
The tax cuts for higher earners are set to expire at the end of this year.