Surprise! Bonus for Business in Obama Tax Deal

Whoa, where did that come from?

President Obama has been campaigning for a bonus depreciation tax break for businesses for months now, but I have to admit I didn't expect it to show up in the tax deal he struck with Republican lawmakers yesterday on the Bush tax cuts.

Nevertheless, it's right there in the White House announcement: “We will provide incentives for businesses to invest and create jobs by allowing them to completely write off their investments next year. This is something identified back in September as a way to help American businesses create jobs. And thanks to this compromise, it's finally going to get done.”

The September proposals that the President referred to were crystallized in a White House report that set out the case for temporary 100 percent expensing of qualified capital. Whereas the report called for 2 years, though, what the President has gotten, at this point, is an agreement for 2011 only.

Will the tax break be enough to tempt businesses to stop hoarding liquidity and invest in productive plant and equipment? Will it result in another Cash-for-Clunkers-style bout of accelerated purchasing followed by sharp decline? We'll see, if it makes it into law.

The other major feature of The Deal that affects businesses, though only administratively, is a proposal for a 1-year, 2 percent cut in Social Security tax paid by employees, from 6.2 percent to 4.2. percent. Employers will still be on the hook for their full share of the payroll tax, though. ###

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