With the national unemployment rate consistently hovering around 10%, and all but acknowledging his economic policies enacted thus far have failed, President Barack Obama has proposed a new “jobs” initiative. Earlier this week, Obama made announcements outlining his latest stimulus plan.
The proposals seek to spend $50 billion on transportation infrastructure to repair roads, railways, runways and modernize the FAA air traffic control system, permanently extend the federal research and development tax credit, and permit businesses to deduct immediately 100% of any new investments they make from now through 2011. Typically, the federal research and development tax credit is extended by Congress on an annual basis and currently businesses are able to deduct capital purchases over a period of three years or 20 years, depending on the investment classification.
While Congressional Republicans are favorable toward the tax provisions included in Obama’s new initiative, they prefer extending the tax relief enacted in 2001 and 2003 permanently, or at very least for a minimum of two years, in order to give employers the certainty they need to invest with confidence and hire additional workers.
Moreover, Republicans cite public dissatisfaction with the President’s policies to borrow and spend when highlighting their staunch opposition to the additional $50 billion in proposed spending, and even some Democrats agree. In a Washington Post article published this week, Sen. Michael Bennet (D-Colo) in response to the President’s proposal was quoted as saying “I will not support additional spending in a second stimulus package.”
While Congressional Republicans would like to see the 2001 and 2003 tax relief provisions extended permanently, they are willing to compromise and are urging President Obama to meet them half way and extend them for an additional two years. However, President Obama is adamantly opposed to the idea, effectively proposing to temporarily reduce taxes in one area, while permanently increasing taxes in other areas.
Should President Obama and Congressional Democrats allow the 2001 and 2003 tax relief to expire, Iowa families will see their federal tax bills increase. According to a report published by the Tax Foundation, a nonpartisan think tank, an Iowa family with a family income of $61,663 will see their taxes increase by $1,616 beginning in 2011.