Obama to Propose Expanded Tax Relief to Encourage Investment in Equipment
Obama to Propose Expanded Tax Relief for Business Investment
Chip Chipman/Bloomberg
The White House will propose allowing companies to fully deduct the cost of equipment such as tractors.
The White House will propose allowing companies to fully deduct the cost of equipment such as tractors. Photographer: Chip Chipman/Bloomberg
President Barack Obama will call for an expansion of a tax incentive designed to encourage businesses to invest in equipment, as part of a push to bolster economic growth before midterm congressional elections on Nov. 2.
The White House will propose allowing companies to fully deduct the cost of equipment such as tractors, wind turbines, computers and solar panels, said an administration official who spoke on condition of anonymity ahead of the president’s announcement this week.
In 2008 and 2009, companies could deduct 50 percent of their costs using so-called bonus deprecation. The latest proposal would increase the tax break to 100 percent through the end of 2011 and make it retroactive to Sept. 8, 2010, the official said.
Obama is planning to outline the $30 billion proposal in an economic speech on Sept. 8 in Cleveland, one of several ideas the White House plans to introduce to encourage job growth and boost the economy.
Bonus depreciation was a tax measure in the economic recovery legislation approved in 2009. It also has been a feature of earlier economic stimulus measures, including one adopted in 2003 under then-President George W. Bush. Factory, office and transportation equipment as well as other types of capital investments all qualify under the proposal, though real estate is excluded.
While companies will realize tax savings in the year they purchase qualified equipment, they’ll pay higher taxes in subsequent years when the property is fully depreciated.
Business Backing
Business groups have pushed to renew the expired bonus- depreciation law through at least 2010.
“Bringing back bonus depreciation will encourage companies of all sizes to invest in newer, more efficient, and more environmentally friendly equipment, which will help large and small businesses alike,” wrote more than 80 lobbying associations including the U.S. Chamber of Commerce and the National Federation of Independent Business in an April letter to congressional leaders.
The U.S. economy grew at a 1.6 percent annual pace in the second quarter after a 3.7 percent expansion in the first three months of the year. Business spending on new equipment and software advanced at a 24.9 percent pace last quarter, the most since 1983.
The tax relief plan is among several proposals the Obama administration is announcing this month to try to prevent the recovery from faltering, as the effects wind down from an $814 billion economic stimulus package approved last year.
To contact the reporter on this story: Lisa Lerer in Washington at llerer@bloomberg.net Julianna Goldman in Washington at jgoldman6@bloomberg.net
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