WASHINGTON — President Barack Obama's budget proposes a number of initiatives to boost job creation and incentives for U.S. manufacturers to bring their overseas business back home.
The business community, however, is yawning at the pitch.
"I think there is something there to dislike for everyone," said Caroline Harris, chief tax counsel for the U.S. Chamber of Commerce.
The chamber has clashed with Obama on everything from health care policy to the revamp of financial regulation. It is unhappy that the administration's budget would end a number of tax incentives for energy production, slap a "Financial Crisis Responsibility Fee" on big banks and financial firms with assets over $50 billion, and take away a number of other business-related tax breaks to shrink future deficits.
There are a few things, however, that the chamber and other business groups like about the plan.
"That list will be a whole lot shorter," said Harris. She pointed mostly to the proposal to reinstate and make permanent the tax credit for firms that conduct research and development. The research and development tax credit is a political football that's tossed around every year before eventually being renewed.
Importantly, that single proposal accounts for $108 billion of the $120 billion total cost over 10 years of the president's proposed tax incentives for manufacturing. That means the other proposals, while carrying a high political profile, aren't actually significant tax incentives.
The administration also proposes $141 billion over 10 years for spending on federal research and development, spanning sectors ranging from robotics to cyber security.
"Private businesses are likely to under-invest in R&D, because they cannot capture all of the gains from their investment," Treasury Secretary Timothy Geithner testified Tuesday before the Senate Finance Committee. "A substantial portion of the benefits, however, accrues to the broader business community or the public at large."
The president also proposed $4.4 billion over 10 years in tax credits for targeted investments in communities that have lost a military base or some other major employer. These credits would provide an incentive for plants to locate in these hard-hit communities.
The National Association of Manufacturers welcomed the extension of the R&D tax credit, the extension of an accelerated depreciation schedule for equipment purchases and a planned public-private partnership to promote advanced manufacturing.
But NAM dismissed proposals touted as employment boosts in manufacturing. Chief among these were tax breaks for companies that bring back production that had moved overseas, a process dubbed "in-shoring."
"It gets back to that's not the way people make business decisions. There's a real disconnect there," said Dorothy Coleman, who heads tax policy for the group.
Specifically, Obama on Monday proposed a general business credit against income tax equal to 20 percent of the expenses associated with in-shoring a U.S. business. The tax credit would be incurred by the foreign subsidiary but credited to the U.S. parent company. The proposal also would reduce tax deductions enjoyed by businesses that are actively moving a U.S. business overseas. The administration estimates the efforts would cost taxpayers $90 million over 10 years.
What really roiled big business was a combined $147.5 billion in new taxes over 10 years rising from revamping several international components of the U.S. tax system.
"The budget proposals would add complexity and uncertainty when what's needed is comprehensive reform of our tax system." John Engler, president of the Business Roundtable, a lobby for big corporations, said in a statement. "Changes to the way we tax foreign-earned income should be considered only in the context of comprehensive tax reform."
Corporate tax reform is something both the administration and Republicans say they want in principle. A senior Treasury Department official who briefed reporters Monday on condition of anonymity said that the administration will issue "a framework" for corporate tax reform in late February.
A recent McClatchy report found that manufacturing in the United States is rebounding, boosted by factors such as higher costs in Asia, low lending rates that make it more affordable to expand at home and falling energy prices for plants that run on natural gas.
Help for manufacturing has been a theme during the GOP presidential primaries, with former Pennsylvania Sen. Rick Santorum proposing to completely eliminate corporate income taxes for U.S. manufacturers. He also proposes having U.S. companies pay zero taxes on profits from foreign manufacturing if those profits are reinvested in American plants. Santorum has not offered details on how to pay for these breaks.
ON THE WEB
The president's proposed budget
MORE FROM MCCLATCHY
Obama's budget frames election choices, doesn't solve long-term problems
Manufacturing rebounds, but is it a renaissance?
Obama's budget would shrink annual deficits, but national debt still explodes
McClatchy's probe into roots of financial crisis, a Pulitzer finalist
To ask a question about this story or any economic question, go to McClatchy's economy Q&A
For more McClatchy politics coverage visit Planet Washington
Comments