Encouraging Business Investment
06:21 PM EDT
The American private sector is the engine of job creation in our economy. This is why the President has made it a priority from the beginning of his Administration to take steps to encourage business investment and job growth in the U.S. and give all businesses the tools they need to prosper.
A new report (pdf) from Business Roundtable highlights the principles and priorities that provide the foundation for the President’s new ideas to accelerate business investment and increase the competitiveness of American firms. The report acknowledges the critical linkages between small and large businesses in our economy, and argued that “government policies should be aiming to promote investment growth and job creation for all U.S. businesses.”
While the report does not acknowledge the Administration’s policy efforts, its findings underscore the importance of the steps the Administration has already taken to encourage investment and the new proposals we are pushing to help small and large businesses alike:
- The President has always recognized that promoting business investment needed to be a crucial component of our economic recovery strategy. That is why the Recovery Act included a number of major tax cuts for all business, including a 50 percent bonus depreciation and an expansion of Net Operating Loss carryback period. These and other Recovery Act tax provisions, along with the additional expansion of the Net Operating Loss carryback period that passed last November, advanced over $109 billion of tax cuts in 2009 and 2010, or about 37 percent of total federal corporate taxes in those years. The Recovery Act received praise from the business community [“Letter Calling for Passage of H.R. 1, the ‘American Recovery and Reinvestment Act of 2009’”, Chamber of Commerce, 2/6/09; “Business Roundtable Recommends Plan for Targeted Economic Stimulus”, Business Roundtable, 2/11/09].
- The President is proposing to build on this to encourage continued investment. Last week he proposed 100 percent expensing for all investments undertaken between September 8th and the end of 2011. This unprecedented step would be the largest investment incentive in American history – to put in perspective, the 2002 plan contained 30 percent bonus depreciation and this country has never had more than 50 percent. Expensing would accelerate nearly $200 billion in tax cuts for America’s businesses.
- Expensing is designed for a short-run kick to the economy. But we need sustained investment and must increase the competitiveness of our economy. One key step in this regard is expanding, simplifying and making permanent the Research & Experimentation tax credit. The President proposed this step last week – specifically a 20 percent increase in the credit, shifting it to a simpler form, and most importantly making it permanent so that you will have the certainty you need to make investments. The importance of making it permanent is highlighted by the fact that it is now mid-September and Republicans are still blocking the bill containing an extension of the R&E credit for 2010.
- The President also recognized that we needed to couple this strategy with an explicit focus on supporting small businesses, which have been particularly hard hit in this economic crisis. That is why the President has signed into law eight separate tax cuts for small businesses, including a new tax credit to help small firms cover the cost of health care for their employees and a new tax credit for hiring unemployed workers.
To build on these efforts, we need to pass the Small Business Jobs Bill that is currently pending in the Senate. That bill would provide an additional 8 small business tax cuts, designed to help encourage hiring and promote small business growth. The bill would:
- Make 4 million small businesses and individuals eligible for higher small business expensing limits
- Extend bonus depreciation for 2 million small businesses and individuals
- Make 1 million small businesses eligible for zero capital gains taxes
- Allow 2 million self-employed to receive a deduction for health insurance costs on their self-employment taxes
- Enable virtually all small business owners to more easily receive a deduction for their use of cell phones
Acting on the small business bill along with the new proposals the President laid out would provide businesses large and small with unprecedented support and encouragement to invest and grow, not only in the short term but over the long term as well.
Valerie Jarrett is Senior Advisor to the President