Obama to seek more business tax breaks

President Barack Obama will call on Congress to pass new tax breaks that would allow businesses to write off 100 percent of their new capital investments through 2011, the latest in a series of proposals the White House is rolling out in hopes of showing action on the economy ahead of the November elections.

An administration official said the tax breaks would save businesses $200 billion over two years, allowing companies to have more cash on hand. The president will outline the proposal during a speech on the economy in Cleveland Wednesday.

In addition to the business investment tax breaks, he will also call for a $50 billion infrastructure investment and a permanent expansion of research and development tax credits for companies.

The proposals would require congressional approval, which is highly uncertain given Washington's partisan atmosphere and the approaching midterm elections.

"We understand what season we've entered in Washington," White House spokesman Robert Gibbs said yesterday. "We certainly hope that there are measures, including some of the ones that the president will outline, that Congress will consider. If they don't do that prior to the election, the president and the economic team still believe that these represent some very important ideas."

Republicans were quick to attack the president's proposals for missing the mark.

House minority leader John Boehner (R-Ohio) going on the offensive ahead of Obama's speech, called Wednesday for a two-year freeze on all current U.S. tax rates, including Bush-era tax cuts for the rich that are set to expire at the end of this year, Reuters reported Wednesday.

Speaking on ABC's "Good Morning America" show, Boehner also proposed the government cut spending for next year to 2008 levels, before the controversial federal bailouts and Obama's $814 billion stimulus plan.

"If we're able to do this together, I think we'll show the American people that we understand what's going on in the country and we'll be able to get our economy moving again and get jobs growing in America," he said.

Even if legislators could pass some of the proposals in the short window before the elections, it's unlikely the efforts would significantly stimulate the economy by November.

The tax breaks for capital investments Obama is proposing would build on stimulus measures enacted in 2008 and 2009 that allowed businesses to depreciate 50 percent of their capital investments. A separate small business bill the White House is urging the Senate to pass would extend that tax break through the end of this year.

If Congress passes the administration's proposal to expand the tax breaks to 100 percent, several million people and 1.5 million businesses would benefit, said the administration official, who spoke on the condition of anonymity because the formal announcement has not been made. The official estimated the ultimate cost to taxpayers over 10 years would be $30 billion, with most of the money lost in tax revenue being recouped as the economy strengthens.

Tax break breakdown

Under the tax break proposed Tuesday, businesses could write off the full amounts of their investments in plants and equipment in the first year they are made. Current law requires that such deductions take place over a period of three to 20 years.

The tax break would be retroactive to Sept. 8 of this year and extend through 2011.

At companies that make machinery, machine tools, high-tech goods and other capital equipment, the tax breaks might provide modest help. That, in turn, could lead to hiring. Companies already intending to build a plant or modernize an existing one might be encouraged to do so.

- AP