Monday: President Obama gestures as he speaks on the economy at the Milwaukee Laborfest in Milwaukee.
Wall Street Journal
President Obama, in one of his most dramatic gestures to business, will propose that companies be allowed to write off 100 percent of their new investment in plant and equipment through 2011, a plan that White House economists say would cut business taxes by nearly $200 billion over two years.
The proposal, to be laid out Wednesday in a speech in Cleveland, tops a raft of announcements, from a proposed expansion of the research and experimentation tax credit to $50 billion in additional spending on roads, railways and runways. But unlike those two ideas, both familiar from Obama's 2008 campaign, the investment incentive would embrace a long-held wish by conservative economists that had never won support from either Republican or Democratic administrations.
"Temporary investment incentives like this can have big effects because they really pull investment forward," R. Glenn Hubbard, dean of the Columbia University School of Business and a former chairman of the Council of Economic Advisers under President George W. Bush. "This could have a big stimulative effect."
But the response Monday from business lobbyists hinted at uncertain political prospects for the idea: Many said a higher priority for their members remains extension of the Bush income-tax rates for higher earners that are set to expire at the end of 2010. Obama and many congressional Democrats want to let those breaks expire.
Administration officials hope businesses spooked by the faltering recovery but with investments already on the drawing board will rush to take advantage of the tax break. The tax would be retroactive to Sept. 8, the day it is announced, so businesses won't delay planned investments while waiting for congressional action.
Congress must approve the proposal, and White House Chief of Staff Rahm Emanuel said Monday the White House hasn't yet discussed legislative strategy. The House and Senate return from recess the week of Sept. 13 with a separate, small-business lending measure as their first priority.
Lawmakers plan to leave Washington again after only a few weeks in session to campaign ahead of the hotly contested midterm elections Nov. 2, so any action on the new proposal may have to wait until a lame-duck session after Election Day, or early next year.