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Obama to Announce Tax Incentive for Businesses

Photo, White House
Photo: White House

President Barack Obama is expected to announce tomorrow that companies will be able to benefit from a new tax write-off for investments over the next year.

The move, along with Obama’s plan to pour $50 billion into infrastructure improvements, is aimed at stimulating companies to purchase now rather than later. The plan would allow businesses to write off 100 percent of their new purchases through December 2011. Currently, companies can deduct the cost of all new investments, but over a longer period: three to 20 years, depending on the price.

The plan has yet to be approved by Congress, which is back in session next week.

A senior administration official said if passed, the proposal could be implemented by up to 1.5 million companies.

Industry leaders and economists are cautiously optimistic about the plan. Kevin Hassett, an economist at the conservative American Enterprise Institute, predicts the incentive could increase business investments by 5 to 10 percent, according to The Wall Street Journal.

The new policy, in addition to giving incentives to businesses, is also a way to allay fears held by some small-business owners about the Bush-era tax cuts for high earners expiring in 2011.

Jade West, senior vice president of the National Association of Wholesaler-Distributors, told The Wall Street Journal, “If this will be offered as a trade-off for raising the top two rates, it’s a non-starter.”

“That said,” she added, “I am delighted to see the administration move toward policies that acknowledge that tax policy has consequences.”

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