Obama to expand business tax relief

Milwaukee: US President Barack Obama this week is proposing to expand tax relief for businesses and boost federal spending on the nation's transportation system to help bolster an economy that's losing jobs heading into the November congressional elections.

Obama is expected to announce an expanded tax incentive to encourage business investment, an administration official said on condition of anonymity. Obama also will urge Congress to extend permanently and expand a research-and-development tax credit for businesses, costing about $100 billion over a decade.

He began the rollout of initiatives on Monday, calling for $50 billion in the first of a six-year programme to fix roads, railways and runways and modernise the air-traffic control system.

"All of this will not only create jobs now, but will make our economy run better over the long haul," Obama said, announcing his public-works programme. "It's a plan that history tells us can and should attract bipartisan support."

Elections

Elections in less than two months to decide US House seats and about a third of the Senate are focused on unemployment near 10 per cent and a budget deficit swelled by the government's financial-system bailout. Obama is travelling this week to Midwestern states where joblessness is hurting some Democratic candidates' chances of getting elected.

Obama's proposals, many of which he has introduced before, will run up against a tight congressional calendar and election- year politics. The Senate is scheduled to return to Washington September 13, and the House reconvenes the next day. Lawmakers will be at work for about three weeks before leaving again to campaign for the November 2 elections.

Bonus depreciation

At an event today in Cleveland, Obama will propose allowing companies to fully deduct the cost of purchasing equipment such as tractors, wind turbines, computers and solar panels, the official said.

In 2008 and 2009, companies could deduct 50 per cent of their costs using so-called bonus depreciation. The latest proposal would increase the tax break to 100 per cent through the end of 2011 and would make it retroactive to September 8, 2010, the official said.

The bonus depreciation measure would cost $30 billion over 10 years. It and the proposed permanent extension of the research tax credit have garnered the support of the business community.

Every president since Bill Clinton has backed a permanent extension of the research tax credit, which Congress extends only temporarily because of its high cost. Speaking to union members and their families on the Labor Day holiday in the US, Obama called for an "infrastructure bank" and requested money to rebuild 150,000 miles of roads, construct and maintain 4,000 miles of rail and overhaul 150 miles of runways.

Stimulus plans

Senate Republican Leader Mitch McConnell, of Kentucky, responded in a statement that the "latest plan for another stimulus should be met with justifiable scepticism," and "Americans are rightly sceptical about Washington Democrats asking for more money."

The Obama administration will work with Congress to ensure the rebuilding plan is fully funded, and a "significant portion of the new investments would be front-loaded in the first year," the White House said in a statement. The spending "will not add to the deficit over time," Obama said.

The programme will focus on long-term modernization of transportation systems and create jobs starting in 2011, an administration official said yesterday. The White House will propose to pay for the new spending by eliminating tax deductions for oil and gas companies, the official said.

Republican economists were sceptical about whether rebuilding roads and other such spending was the best way to help the economy rebound.

"Infrastructure programs are always popular for stimulus talk but disappointing in practice," Douglas Holtz-Eakin, president of the Washington-based American Action Forum, said.