President-elect Barack Obama's proposed economic stimulus bill will likely contain some hefty tax breaks for businesses as well as individuals. Tax cuts are expected to account for up to 40 percent of the $775 billion package.

Leaders of the U.S. Chamber of Commerce applauded the proposals Wednesday. "The Chamber will support a package the sensibly restores liquidity, consumption, investment and confidence to our economic system," said Tim Donohue, president and CEO of the Chamber. "Based on reports we have seen and the conversations we have had, the Chamber is very encouraged by the direction the President-elect is taking with his recovery package."

In its just-released report "The State of American Business 2009," the Chamber identifies the tax measures that it believes would have the most positive impact on the ailing economy. Some of these point in the same direction as Obama's plan. For example, the report calls for an extension of the tax carryback period, currently two years, to five years in order to help businesses with looming losses conserve liquidity. The Council also recommends extending the bonus depreciation provisions of President Bush's 2008 economic stimulus package and enhancing Section 179 expensing provisions, which allow corporations to write off certain capital expenditures in the tax year of purchase rather than depreciating them over the assets' useful life.

Among the other moves that the Chamber would like Mr. Obama to consider:

• Suspending the requirement for companies to recognize income associated with debt repurchase. This would give businesses an incentive to buy back their own debt, and would help them weather the downturn without resorting to layoffs, pay cuts, or benefit reductions.
• Reducing the corporate capital gains tax rate to 15 percent.
• Temporarily allowing U.S. companies to repatriate foreign subsidiary earnings at a reduced tax rate (as they were in fiscal year 2005 under the American Jobs Creation Act).
• Repealing the 3 percent tax withholding on all government contract payments.
• Temporarily reducing the borrower and lending fees for Small Business Administration lending programs.

The Chamber's economists don't expect the recession to bottom out until mid-year, and they predict that unemployment will continue to climb even after that, eventually hitting 8.5 percent to 9 percent. But Donohue is upbeat on the stimulus package's chances of success. "We have two choices. We can bemoan our fate and keep telling each other how bad things are. Or we can get right down to the business of reviving the economy, restoring growth and job creation, and putting Americans back to work."

Download [1] the full U.S. Chamber of Commerce report.