Seeking ways to spur economic growth ahead of the November elections, US President Barack Obama will ask Congress to increase and permanently extend research and development (R&D) tax credits for businesses, a White House official said.
Obama will outline the US$100 billion proposal during a speech on the economy tomorrow in Cleveland, Ohio, the official said. The announcement is expected to be the first in a series of new measures Obama will propose this fall as the administration looks to jump-start an economy that he has said isn’t growing fast enough.
In addition to making the research credits permanent, Obama will ask Congress to extend one of the credit options available to businesses from 14 to 17 percent, said the official, who spoke on Sunday on the condition of anonymity because the proposal has not been formally announced.
Obama has proposed making the R&D tax credit permanent before, as part of the budget he submitted to Congress earlier this year.
“That’s where US competitiveness lies in high-technology industries,” Laura Tyson, a member of Obama’s Economic Recovery Advisory Board, said on Sunday on Face the Nation on CBS.
“I don’t think this is something that has ... as immediate a job impact as, say, movement on the current tax credits for the unemployed or extending a payroll tax holiday of some sort. But I think it’s very important in terms of job creation over the longer term,” Tyson said.
While the idea is popular in Congress, coming up with offsetting tax increases or spending cuts has been a stumbling block. Obama will ask lawmakers to close corporate tax breaks for multinational corporations and oil and gas companies.
Congress has previously passed research tax credits on a temporary basis. The credits expired last year and a proposal for renewal is pending in the Senate.
While research credits generally have bipartisan support, Washington’s contentious political atmosphere means the White House isn’t taking anything for granted. Officials have watched other proposals they deem necessary to economic growth, including a bill to extend credit and cut taxes for small businesses, languish on Capitol Hill.
The proposal for R&D tax credits was first reported by the New York Times.
Amid an uptick in the jobless rate to 9.6 percent, Obama promised to announce a series of new measures on the economy. The package could include infrastructure bonds for municipalities and extensions for other tax breaks for businesses and individuals that expired at the end of last year.
The administration is also considering extending a law passed in March that exempts firms that hire unemployed workers from paying Social Security taxes on those workers through December. Senator Chuck Schumer has proposed extending it by six months.
Obama is continuing to prod the Senate to pass the small business bill that calls for about US$12 billion in tax breaks and a US$30 billion fund to help unfreeze lending. Republicans have likened the bill to the unpopular bailout of the financial industry. He also wants to make permanent the portion of former US president George W. Bush’s tax cuts affecting the middle class.
The House of Representatives has already passed many of the provisions, but they have stalled in the Senate because Republicans and Democrats cannot agree on how to pay for them.
American Federation of Labor president Richard Trumka argued for job investment as a way of putting money in the pockets of the middle class.
“We do need more credit for small and mid-sized businesses so that they can start creating jobs,” Trumka said on Sunday on CNN’s State of the Union. “All of that will help, but it may not be enough. Even the holiday on taxes may not be enough, the research and development tax credit may not be enough. We need to create demand.”
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