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Obama Gets Write-Offs Right

A Commentary by Lawrence Kudlow

Tuesday, September 07, 2010

It’s all midterm-election politics, but Obama’s last-minute idea for 100 percent tax write-offs for corporate investment is, in fact, a good idea.

He proposes a two-year window to incentivize businesses to bring forward their investments. From the standpoint of investment, it’s the right way to go. Perhaps Larry Summers now thinks tax cuts are the right way to go, too.

CEOs like Fred Smith of FedEx have argued for full cash expensing for many years, along with a big drop in the corporate tax rate itself. This is what Team Obama should have done in the first place: Slash business tax rates and accelerate investment-depreciation schedules.

Years ago, Gary and Aldona Robbins did work showing that accelerated investment depreciation gives the biggest bang for the buck -- roughly $10 of new GDP for each dollar of faster tax write-offs for investment. Those write-offs, a lower capital-gains tax rate, and a cut in the corporate tax have been powerful economic stimulants in the past.

Perhaps a Republican Congress in 2011 will go back to these business tax-cutting approaches. When businesses invest, they create new jobs. (Of course, any of these business tax provisions should be universalized for large, medium, and small companies.)

Meanwhile, Obama’s other proposal for $50 billion in infrastructure spending is a laughing stock. More failed spending stimulus. Think of it. I guess Team Obama had to put this in to please their union supporters who will get the Davis-Bacon wage rate rather than a true market rate.

And Obama’s infrastructure-bank idea is going nowhere. It’s like Fannie Mae for road building. But we already have Fannie and Freddie, and they’re broke. And the taxpayers own them. It’s a big political boondoggle.

So I guess Team Obama really is addicted to these big-government, big-spending, economic-planning ideas. They need a 12-step program to get off them. And that’s coming. It’s called the midterm elections.

COPYRIGHT 2010 CREATORS SYNDICATE INC.

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