President Barack Obama won praise from business groups that have criticized his labor, health and financial regulatory policies after he agreed to extend tax cuts for all Americans and cut workers’ payroll taxes.
Obama’s deal with Republicans in Congress to maintain for two years the Bush-era tax cuts that are to expire this month and give businesses more write-offs on research and machinery costs will boost the economy by removing uncertainty that led to the complaints from executives, Bruce Josten, chief lobbyist for the U.S. Chamber of Commerce, said today.
The agreement “is one of the best steps Washington can take to eliminate the uncertainty that is preventing our employers from hiring, investing, and growing their businesses,” Josten said in an e-mail. It will “go a long way toward helping our economy break out of this slump and begin creating American jobs.”
The Chamber, the largest Washington lobbying group, spent more than $30 million on political advertising in this year’s election, mostly to support Republican candidates. The Chamber said a “tsunami” of regulations from Obama on health care, labor and the environment have undercut economic growth and cost the American economy jobs.
“The president made the right decision for the country and the economy by not increasing taxes in what is still the worst recession and jobs crisis since the Great Depression,” said Daniel DiMicco, chief executive officer of steelmaker Nucor Corp.
AT&T Inc. Chief Financial Officer Rick Lindner said the economy is too fragile to resume tax rates in place before the Bush cuts took effect. “You need to incent businesses to grow,” Lindner said today.
After almost a week of negotiations with lawmakers led by Treasury Secretary Timothy Geithner and budget director Jack Lew, Obama announced last night he’ll accept a deal that would keep current tax rates for high-income taxpayers for two years in exchange for extending federal unemployment insurance for the long-term jobless and cutting the payroll tax by $120 billion for one year.
Executives credited the Republican victories in the Nov. 2 election, in which they won control of House and added to their seats in the Senate, for forcing a shift in strategy by an administration they blamed for undercutting companies.
“He is anti-business,” Mike Jackson, chief executive officer of AutoNation Inc., said in an interview. “He had to be dragged kicking and screaming. It took a shellacking to get him here.”
Obama had sought to maintain the lower tax rates on the first $200,000 of an individual’s annual income and first $250,000 in yearly earnings for married couples filing joint returns. The president now faces criticism for abandoning his pledge to extend tax cuts only for middle-income Americans. The tax cuts were adopted during the George W. Bush administration.
Representative Chris Van Hollen of Maryland, a member of the Democratic leadership, said today on Bloomberg Television that he had “serious reservations,” and House Speaker Nancy Pelosi faulted extending the top tax rates.
The deal “gives us the time to have this political battle without having the same casualties for the American people that are my No. 1 concern” Obama said today at a White House news conference.
The compromise, if approved by Congress, will boost the economy, help stock markets and signal a pullback from Washington’s mounting interference in the economy since Obama took office in 2009, Thomas Lee, chief equity strategist for JPMorgan Chase & Co. in New York, said in an e-mail.
“The most important thing is that Washington is going to do something sensible, rather than all the crazy things we’ve seen” in the past two years, William Dunkelberg, the chief economist of the Nashville, Tennessee-based National Federation of Independent Business, said in an interview.
The group, representing U.S. small-business owners, fought Obama’s health-care legislation and sought to head off legislation that passed the House of Representatives to regulate carbon emissions. In early 2009, Dunkelberg said he advocated a full suspension of the payroll tax, which funds Social Security and Medicare, in place of Obama’s stimulus package of tax cuts and government infrastructure projects.
Obama’s deal with the Republicans includes a 2 percentage point cut in the payroll tax, representing a savings of about a third on the 6.2 percent share of the tax workers normally pay.
‘Little More Stimulus’
“The consumer will get a little more stimulus, and they will spend it,” Dunkelberg said in an interview.
Obama also endorsed allowing full deduction for equipment purchases that now are written down over time. The proposal would accelerate $200 billion in tax savings for companies in the first year and benefit 1.5 million companies and several million individuals who run businesses, according to White House estimates.
Such a reduction will help both the companies investing in new machinery and the makers of that equipment, said Dorothy Coleman, the vice president for tax policy at the Washington- based National Association of Manufacturers.
“That’s a two-for for manufacturers,” Coleman said in an interview.
Some business leaders say they are worried that the tax deal will add to the U.S. deficit.
“It seems that we will have less revenue and higher expenditures,” Peter Huntsman, the chief executive of Huntsman Corp., said in an e-mail. “This will lead to a path to economic destruction. I can only hope their next battle will be addressing our growing imbalance of revenues and expenditures.”
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