No Tax Cut Extension for Wealthiest Americans

(CBS/ AP)  President Obama will announce in a speech on Wednesday that he will oppose any compromises that extend the Bush-era tax cuts for the wealthy beyond the end of this year, the New York Times reported Tuesday.

There has been a big push among Republicans to extend the Bush-era tax cuts for each income tax bracket, including the wealthiest Americans. Mr. Obama's stance on the issue is part of an economic plan that has populist underpinnings as well as components that are designed to get support from Republicans and business, according to the Times.

The Democrats are suffering in the arena of public opinion. In the weeks leading up to the November elections, Mr. Obama will have to rally support wherever he can. The choice to deny the wealthiest Americans an extension on the Bush-era tax cuts is likely a signal to the middle class by Mr. Obama that he is on their side.

Orszag Suggests Extending Tax Cuts for the Rich
Special Section: Campaign 2010

The proposed tax breaks for business sound like ideas that have enjoyed broad Republican backing in the past. But in today's toxic political atmosphere, he's unlikely to get much - if any - GOP help.

Still, Mr. Obama's plans put Republicans on the spot, making it harder for them to say no to legislation they once embraced.

In a speech on Wednesday in Cleveland, Obama will ask Congress to let businesses quickly write off 100 percent of their spending on new plants and equipment through 2011.

Its part of a raft of new Obama proposals to spur job creation and help businesses - and to try to give his party a much-needed boost ahead of November elections that will determine which party controls the House and Senate.

Clearly frustrated by the halting economic recovery and mindful of polls showing Republicans poised to make big midterm gains, Obama had his economic advisers come up with a fresh set of proposals with job-creating potential.

Among them: a $50 billion program to rebuild roads, railways and airports and to create a new infrastructure bank to oversee long-term projects. Legislation containing multiple public works projects has usually been popular in Congress across party lines.

The administration has not spelled out exactly how it would pay for all the new proposals, but suggested it would offset tax cuts by closing various corporate loopholes and levying targeted tax hikes on big business, particularly on the oil and gas industry and on multinational corporations. Some of these tax proposals were included in the budget Obama submitted to Congress earlier this year but were never acted on by Congress.

Rep. Dave Camp of Michigan, the senior Republican on the tax-writing House Ways and Means Committee, called Obama's business tax measures serious proposals worthy of consideration. But he said that "raising taxes to cut taxes is at best a zero sum game."

The proposed tax break for research and development has been around in one form or another since 1981 and in the past has drawn bipartisan support. However, Congress previously extended it just for short periods of time, usually just for one or two years, with frequent lapses that make it hard for businesses to plan. The credit most recently lapsed in 2009.

Obama has long advocated making the credit permanent.

His proposal to let companies quickly write off 100 percent of their investments in new plants and equipment is similar to proposals advanced several times by President George W. Bush - with considerable GOP support at the time.

The idea is to give companies an incentive to spend and invest now, rather than later. The administration claims the change would put nearly $200 billion in the hands of businesses over the next two years.

Under the current law, a company gets to deduct 50 percent of the costs upfront, and the remainder over three to 20 years, depending on the nature of the investment.

"This measure would provide tax incentives for businesses to invest in the United States when our economy needs it most," says a White House fact sheet.

A senior administration official said the expensing provision would potentially benefit 1.5 million corporations and several million individuals. The tax break would be retroactive to this Wednesday.

Obama's expensing and R&D tax credit proposals would generally help large businesses the most. A separate bill is before the Senate to give special tax breaks and loan incentives to small businesses. Obama has said that legislation should be Congress' first order of business when it returns next week from its summer recess.

Chris Edwards, director of tax policy for the libertarian-leaning Cato Institute, said he favors both a permanent research tax credit and Obama's proposal for 100 percent expensing, calling both "very positive" steps and a sign that the administration is getting seriously worried about the economy.

Still, he added, "the administration would nullify the benefits if they are matched by various tax proposals for businesses."

Thomas Mann, a political scientist at the Brookings Institution, said Obama's three proposals - infrastructure spending, a permanent R&D credit and upfront 100 percent business write-offs - "constitute a re-entry into the make-the-economy-grow argument."

"All of them had support among conservatives and right-of-center economists for many years. That makes it more awkward for the Republicans just to say no," Mann said. But that isn't stopping them, he added.

The Obama proposals would require congressional approval, which is highly uncertain given Washington's partisan atmosphere and the fast-approaching midterms.

"We understand what season we've entered in Washington," said White House spokesman Robert Gibbs. Still, he said, even if Congress doesn't take up Obama's new proposals before the elections, "the president and the economic team still believe that these represent some very important ideas."

The acceleration of the business write-off for plants and equipment would have a net long-term cost of $30 billion, far less than the amount the legislation would put in the hands of businesses, the White House contends. That's because if companies take their write-offs upfront, they can't depreciate the costs over a longer period for future tax breaks - as they do now.

Republican leaders greeted Obama's most recent proposals cautiously, given past GOP support for various components.

"The White House is missing the big picture," said House Minority Leader John Boehner, R-Ohio. "These aren't necessarily bad proposals. ..." But he said they don't address the larger problems of "excessive government spending" and Democratic tax policies, including the impending expiration of Bush-era tax cuts.

Obama and Democratic congressional leaders want to renew the Bush tax cuts for households earning under $250,000 a year. Republicans want to extend all of them, saying a recession is no time to raise taxes.

Obama's recently departed budget director, Peter Orszag, suggested in an op-ed article in Tuesday's New York Times that policymakers seem locked "into a budget scenario out of which there are few politically plausible routes of escape." As a compromise, he suggested extending the Bush tax cuts until 2013 "and then end them altogether."

Gibbs said he had never heard Orszag make such an argument in internal White House deliberations and that the president did not agree with him on such a "compromise."

[terrygem]

THE President needs to get loud and angry, to refresh the public's perception of wghos on their side and not the "PARTY OF NO". Can't they see that we have not had enough time to UNSCREW all the damage of the King George and his bunch of merry crones.

[mscientist]

If by "unscrew all the damage" you mean quadrupling the deficit and shoving a healthcare bill down our throats that nobody read and we didn't want, then no. I guess we can't see it.

As for the tired old "party of no" mantra, its a good thing that there is at least someone willing to stand up and say no to this non-sense.

NO you can't have more of my money. NO you can't give my money to illegals. NO, you can't take away more of my freedoms. NO you can't spend more than you bring in and then come begging for more. NO you can't borrow money that my grandkids have no hope of paying back. NO you can't print more money just because you mismanaged the last trillion you had.

[starving1968-3]

by Mortar_29 September 8, 2010 1:03 PM EDT

You see, in an environment where the government isnt hammering the "rich" and businesses...the taxes that go back to the rich will be spent and invested. Why? Because they want to make MORE money. The only way they do that is create wealth.







The wealthy were given an estimated $2.5 TRILLION in tax breaks from 2001 - 2010 under the "bush tax cuts" scam.

During that time, 6 MILLION manufacturing jobs were lost in America and shipped overseas where they are now being performed by children, slaves, and prisoners.

Yes, they "invested" that massive kickback of money, but they sure as hell didn't invest it in America, our economy, or our workforce!!!

[terrygem]

Republicans have a very "short and convenient" memory.The pillage and plunder of our society by rich and powerful that's bought the Republican support has GOT TO STOP! Does anyone remember the Bush years and all of the catastrophic idiocy associated? Or was the premise a smoke screen to fool us? WAKE UP AMERICA!

[usadvisor101]

well how did this work out for everyone else over the past 9 years or so.............oh yeah, the wealthy and connected made out fine while the rest in our country lost jobs,houses and income. It was a great program for bush and his robber baron buddies.

[terrygem]

So true wise man.How much does it take until the public says enough?

[Amazingoly]

Always wanted a president who is always angry, and flies around the country giving speeches and campaigns, parties, plays golf (are his scores sealed or unavailable?), bad mouths the previous administration!

[terrygem]

Dopes pseaking the truth equate to bad mouthing? What about all of the Republican dishonesty towards the current adminsitration? The part of no I don't care about the average american...have our best interests or only for special interests? You should be ashamed of yourself!

[phydeux2]

Obama is a stupid, foolish man!! When is he going to recognize that the wealthy are the primary investors in new business, as well as the people most capable of taking that investment power elsewhere?

If you lower taxes across the board, including on the wealthy, they will invest in expanding their business ventures or help provide capital for new ventures by others. Look at all those venture capitalists who help fund small business startups.

But if you continue to strangle them with confiscatory taxes (read as: you're rich, so your money is mine!) all they're going to do is take their money and go play with it elsewhere. They'll invest it in China, India, Pakistan, or some other country where they'll get a good return on it and not be taxed to death.

I scarcely make $32,000 a year these days, and I'm a 20-year veteran IT professional. And the ONLY reason I have a steady job in this dismal economy is because a couple of billionaires in California are keeping alive a small business that's barely treading water. They could have easily shut it down and sent all 20 of us home, but they'd rather keep us employed and hope for brighter days to return.

And if Obama continues to see the rich as nothing more than a big fat evil piggy bank to be beaten and robbed, then this country's doomed to become a banana republic before I'm old enough to retire.

[pigbitinmad]

The reason you make almost nothing compared to what you used to is because the CEOs are paying THEMSELVES too much money and are already investing in India and China. They don't give a toss about you. If you will work for five cents an hour they will bring the jobs here. Our government rewards them for moving jobs overseas. And as long as it is profitable they will keep doing it. The government should make it illegal to manufacture overseas for import here. And companies that do it should be stripped of their right to sell here. Then you would see how many people would take their place and start new companies here. Right now the system is rigged. They pocket the money and use it buy off the politicians to write laws that favor them. If something doesn't change they say we should all be dog walkers or baby sitters. How many of these types of jobs will the economy support.

[kevjustice]

BLANKET TAX-CUTS FOR THE RICH WITH NO STRINGS ATTACHED IS ONE OF THE BIGGEST SCAMS IN AMERICA. IT IS NOTHING MORE THAN A PAYOFF FOR THE CAMPAIGN CONTRIBUTIONS(IN REALITY BRIBES) MADE BY CORPORATE AMERICA/THE RICH. THE BIG PROBLEM HERE IS THAT THE CORPORATIONS CAN DO ANYTHING THEY WANT WITH THE TAX CUT. SOME MAY ADD WORKERS BUT OTHERS WILL USE THE MONEY TO GIVE PAY RAISES TO THEIR CEO'S(NOT FOR NEW HIRES) AND WORST OF ALL SOME WILL USE THE MONEY TO OUTSOURCE JOBS(START UP MONEY FOR OVERSEAS ACTIVITIES).

[rightbehind]

Wow! I'm actually feeling like making donations to the democrats again.

[mscientist]

step away from the cliff :)

[RobAla]

The last thing we need to do in this horrible recession is to redirect money out of the economy and into Washington through letting the tax cuts expire. This President and the current progressive leaders in Washington are killing our economy and preventing job growth in the private sector by ever expanding the federal government on the backs of business and taxpayers.

The stupid health care bill is stopping job growth. Business are sitting on cash instead of hiring because they expect to have huge additional cost because of the health care bill. We are going in the wrong direction. We need to reduce the federal government to a manageable size, and create an environment where private sector business can begin hiring again. Throw these people out in November.

[mscientist]

Your wise words will fall on many deaf ears. Here is the apparent logic. Bush = bad. Therefore Obama = good.

Far be it from any of them to stop foaming at the mouth long enough to ask some very basic common sense questions. Can you spend your way out of debt? When was the last time the government (under ANY leadership) did a better job at ANYTHING than the private sector? If SS is going broke, and Medicare is Going broke, can we trust the government to run healthcare?

Here's my favorite. Everyone who thinks spending more money than you have is a good idea, kindly raise your hand....or sit down and shut up.

[askagain]

Two themes many posters dwell on are the stimulus package and taking tax cuts from the wealthy. Some argue that the stimulus has helped while others argue that it hasn't helped. Some argue that tax cuts for the wealthy improves employment while others argue that it deoesn' help. The question is how do we know which side is right. Most of us agree that the economy is in trouble. What might the ecoomy be like without the stimulus and what would employment be like without lower taxes for the wealthy. We may never really know the answers.

[ksmit2]

The idea of tax cuts to help the economy has had years to work, and the
economy is still in the outhouse. Our country had billionaires and
prosperous industries when taxes were twice as high. Time and influence
decided that they were not rich enough. A tax cut isn't a true tax cut
when you then borrow billions from foreign banks to cover the loss in
revenue. Your tax cut will then have to be paid anyway, along with interest. I don't like a "gift" that I will eventually get a bill for.