Guess Who's Talking Tax Breaks...

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WASHINGTON — President Barack Obama's proposed tax breaks for business sound like ideas that have enjoyed broad Republican backing in the past. But in today's toxic political atmosphere, he's unlikely to get much — if any — GOP help.

Still, his plans put Republicans on the spot, making it harder for them to say no to legislation they once embraced.

In a speech on Wednesday in Cleveland, Obama will ask Congress to let businesses quickly write off 100 percent of their spending on new plants and equipment through 2011.

Its part of a raft of new Obama proposals to spur job creation and help businesses — and to try to give his party a much-needed boost ahead of November elections that will determine which party controls the House and Senate.

Clearly frustrated by the halting economic recovery and mindful of polls showing Republicans poised to make big midterm gains, Obama had his economic advisers come up with a fresh set of proposals with job-creating potential.
CBS News: Obama to 'Keep Fighting' for Economy

Among them: a $50 billion program to rebuild roads, railways and airports and to create a new infrastructure bank to oversee long-term projects. Legislation containing multiple public works projects has usually been popular in Congress across party lines.

The administration has not spelled out exactly how it would pay for all the new proposals, but suggested it would offset tax cuts by closing various corporate loopholes and levying targeted tax hikes on big business, particularly on the oil and gas industry and on multinational corporations. Some of these tax proposals were included in the budget Obama submitted to Congress earlier this year but were never acted on by Congress.

Rep. Dave Camp of Michigan, the senior Republican on the tax-writing House Ways and Means Committee, called Obama's business tax measures serious proposals worthy of consideration. But he said that "raising taxes to cut taxes is at best a zero sum game."

The proposed tax break for research and development has been around in one form or another since 1981 and in the past has drawn bipartisan support. However, Congress previously extended it just for short periods of time, usually just for one or two years, with frequent lapses that make it hard for businesses to plan. The credit most recently lapsed in 2009.

Obama has long advocated making the credit permanent.

His proposal to let companies quickly write off 100 percent of their investments in new plants and equipment is similar to proposals advanced several times by President George W. Bush — with considerable GOP support at the time.

The idea is to give companies an incentive to spend and invest now, rather than later. The administration claims the change would put nearly $200 billion in the hands of businesses over the next two years.

Under the current law, a company gets to deduct 50 percent of the costs upfront, and the remainder over three to 20 years, depending on the nature of the investment.

"This measure would provide tax incentives for businesses to invest in the United States when our economy needs it most," says a White House fact sheet.

A senior administration official said the expensing provision would potentially benefit 1.5 million corporations and several million individuals. The tax break would be retroactive to this Wednesday.

Obama's expensing and R&D tax credit proposals would generally help large businesses the most. A separate bill is before the Senate to give special tax breaks and loan incentives to small businesses. Obama has said that legislation should be Congress' first order of business when it returns next week from its summer recess.

Chris Edwards, director of tax policy for the libertarian-leaning Cato Institute, said he favors both a permanent research tax credit and Obama's proposal for 100 percent expensing, calling both "very positive" steps and a sign that the administration is getting seriously worried about the economy.

Still, he added, "the administration would nullify the benefits if they are matched by various tax proposals for businesses."

Thomas Mann, a political scientist at the Brookings Institution, said Obama's three proposals — infrastructure spending, a permanent R&D credit and upfront 100 percent business write-offs — "constitute a re-entry into the make-the-economy-grow argument."

"All of them had support among conservatives and right-of-center economists for many years. That makes it more awkward for the Republicans just to say no," Mann said. But that isn't stopping them, he added.

The Obama proposals would require congressional approval, which is highly uncertain given Washington's partisan atmosphere and the fast-approaching midterms.

"We understand what season we've entered in Washington," said White House spokesman Robert Gibbs. Still, he said, even if Congress doesn't take up Obama's new proposals before the elections, "the president and the economic team still believe that these represent some very important ideas."

The acceleration of the business write-off for plants and equipment would have a net long-term cost of $30 billion, far less than the amount the legislation would put in the hands of businesses, the White House contends. That's because if companies take their write-offs upfront, they can't depreciate the costs over a longer period for future tax breaks — as they do now.

Republican leaders greeted Obama's most recent proposals cautiously, given past GOP support for various components.

"The White House is missing the big picture," said House Minority Leader John Boehner, R-Ohio. "These aren't necessarily bad proposals. ..." But he said they don't address the larger problems of "excessive government spending" and Democratic tax policies, including the impending expiration of Bush-era tax cuts.

Obama and Democratic congressional leaders want to renew the Bush tax cuts for households earning under $250,000 a year. Republicans want to extend all of them, saying a recession is no time to raise taxes.

Obama's recently departed budget director, Peter Orszag, suggested in an op-ed article in Tuesday's New York Times that policymakers seem locked "into a budget scenario out of which there are few politically plausible routes of escape." As a compromise, he suggested extending the Bush tax cuts until 2013 "and then end them altogether."

Gibbs said he had never heard Orszag make such an argument in internal White House deliberations and that the president did not agree with him on such a "compromise."

___

Associated Press writers Julie Pace and Stephen Ohlemacher contributed to this report.

I happen to think that these particular tax cuts/credits are great ideas and hope that they are enacted, but the political play is so blatant that I feel disrespected, sort of like John Kerry's sudden enthusiasm for hunting back in 2004. Does anyone actually think that throwing out a few tax cuts at the last minute is going to change anyone's mind about the upcoming midterms? If this is Rahm Emanuel's work, I'll pay him the backhanded complement that he's no Karl Rove.

Hey, good policy is good policy, regardless of ulterior motives. Politicians only ever do anything for their own political gain anyways, this is just slightly more transparent than usual.

These are all empty proposals that won't do a lick of good. Here's why....

Businesses are not investing because they don't yet know what impact laws already passed (e.g., "Obamacare") and others being discussed will have on the bottom line of running a business in America. Businesses WILL NOT invest or expand during economic uncertainty or if there is a real threat of government confiscating most of the proceeds of a successful business.

Obama's proposals:

$50 billion program to rebuild roads, railways and airports and to create a new infrastructure bank to oversee long-term projects.

This is largely pointless. Existing companies get these contracts. They won't hire more people unless they have more work than manpower to cover, and you can bet unless you establish tight construction deadlines, they won't hire more people to get the job done.

R&D tax break.

As stated, hard to plan on, but again, a tax break does not = more jobs as a guaranteed result. It just enables a company to either maximize profits or pour more money into R&D projects. The higher cost in R&D is materials, not manpower.

Let companies quickly write off 100 percent of their investments in new plants and equipment.

Nice, but I doubt companies would buy enough to put many people to work. The expansion of industry in the USA is going to be tied to how much earnings they get to keep. That is unsettled at this point, so only expect companies to buy stuff they were putting off because it's better to use this write off while it's available.

Hey, good policy is good policy, regardless of ulterior motives. Politicians only ever do anything for their own political gain anyways, this is just slightly more transparent than usual.

The $787 billion stimulus was about $300 billion tax cuts and credits. This is nothing new for Obama. Remember, it's the Politically Correct way to stimulate the economy in this Neoliberal Supply Side post-Cold War Era.

In a speech on Wednesday in Cleveland, Obama will ask Congress to let businesses quickly write off 100 percent of their spending on new plants and equipment through 2011.

Why should presidents have business experience? Clearly his advisorate has decided this to be a good idea - to concentrate goodies to the immediate now for stimulative purposes... the point is stimulation to counteract debt deflation that's the problem ongoing. And no, the solution is not to "liquidate labour, liquidate stocks, liquidate farmers, liquidate real estate."

"Liquidate labour, liquidate stocks, liquidate farmers, liquidate real estate" is something Andrew Mellon suggested as the answer to the Great Depression and he was Harding's, Coolidge's and Hoover's Secretary of the Treasury. Unfortunately there are many who believe in this advice - the so-called Tea Party for instance.

As for Obama's advisorate they are mostly the same crew that were into the deregulation mania in the late '90s and worked for Goldman Sachs.