As part of his emerging program to jolt the economic recovery from its stall, President Obama will call for allowing businesses to deduct new equipment purchases to increase demand for goods and create jobs.

White-HouseWASHINGTON, D.C. — As part of his emerging program to jolt the economic recovery from its stall, President Obama will call for allowing businesses to deduct from their taxes through 2011 the full value of new equipment purchase, from computers to utility generators, to increase demand for goods and create jobs.

The upfront deduction would allow businesses of all sizes to keep more money now and would give large corporations, many of which are sitting on cash because of uncertainty about the economy, an incentive to spend and invest.

It would cost an estimated $200 billion in revenues, though the ultimate net loss would be $30 billion over 10 years, administration officials say, since businesses would eventually deduct the depreciated value of the equipment in any case.

The proposal for 100 percent expensing through 2011 will be part of a package that Mr. Obama will outline on Wednesday in Cleveland in a speech on the economy.

The stimulus initiative will also include proposals for an additional $50 billion for infrastructure investments and a new infrastructure bank for projects over the long term, which Mr. Obama described at a Labor Day event in Wisconsin on Monday.

And it will have a provision to expand and make permanent a tax credit for corporations’ research and development expenses; for three decades, the credit has been enacted temporarily, given its revenue cost, and then always extended, but with frequent lapses that frustrate businesses.

Click here to read the full article.

Source: Jackie Calmes | The New York Times