Obama to seek R&D tax credits to spark growth

WASHINGTON - Seeking ways to spur economic growth ahead of the November elections, President Barack Obama will ask Congress to increase and permanently extend research and development tax credits for businesses, a White House official said Sunday.

Obama will outline the $100- billion proposal during a speech on the economy Wednesday in Cleveland, the official said. The announcement is expected to be the first in a series of new measures Obama will propose this fall as the administration looks to jump-start an economy that the president himself has said isn't growing fast enough.

In addition to making the research credits permanent, Obama will also ask Congress to extend one of the credit options available to businesses from 14 to 17 percent, according to the official.

Obama has proposed making the research and development tax credit permanent before, as part of the budget he submitted to Congress earlier this year.

"That's where U.S. competitiveness lies in high-technology industries," Laura D'Andrea Tyson, a member of Obama's Economic Recovery Advisory Board, said Sunday on CBS' "Face the Nation." She said the research tax credit is "very important in terms of job creation over the longer term." She also suggested a suspension of the payroll tax for businesses that hire new workers would have a more immediate impact.

"The business community is on board for the R&D tax credit," Mark Zandi, chief economist at Moody's Analytics, said on "Face the Nation." Still, he said Obama will "have to take some of the corporate tax benefits away to pay for it."

While the idea is popular in Congress, coming up with offsetting tax increases or spending cuts has been a stumbling block. Obama will ask lawmakers to close corporate tax breaks for multinational corporations and oil and gas companies.

But Sen. John McCain (R-Ariz.) said Sunday he doubts the economic proposals Obama will announce Wednesday would help Democrats in the congressional elections. "They are just flailing around," McCain, his party's 2008 presidential nominee, said on "Fox News Sunday." McCain added: "If we had done this kind of thing nearly a couple of years ago we'd be in a lot better shape."

Amid an uptick in the jobless rate to 9.6 percent, the president promised to announce a series of new measures on the economy. The package could include infrastructure bonds for municipalities and extensions for other tax breaks for businesses and individuals that expired at the end of 2009.

With Bloomberg News