When President Obama came into office our nation was losing 750,000 jobs a month, and the President took difficult steps to help save our economy and stave off a second Great Depression. While some of those steps weren’t popular, they were the right thing to do for our recovery: our country has now added private sector jobs for eight straight months and growth is back in positive territory.
Still, the turnaround hasn’t happened fast enough. Main Street businesses are not yet back to firing on all cylinders, and too many Americans remain out of work.
That’s why yesterday, the President unveiled a targeted set of proposals to continue our economic recovery and promote growth. One of these proposals will allow companies to fully deduct qualified capital investments through the end of 2011, and represents the largest temporary investment incentive in American history.
Here’s how it works. Today, if you own a business and buy a $10 million piece of equipment for your factory, your accountants predict how long that piece of equipment will last. In this case, let’s say it’s 10 years. Every year, that piece of equipment depreciates in value, and as the business owner, you get to write off that loss, in small increments, every year for the next 10 years.
Under the president’s plan, you don’t have to wait those 10 years to get the full amount of this tax relief. If you are a business owner and buy a new piece of equipment or make another capital investment, you can take the full deduction right away. In order to begin encouraging additional investment immediately, President Obama has proposed that the benefit be retroactive to today, September 8, 2010, to encourage U.S. companies to make these purchases now.
This plan will put nearly $200 billion in the hands of businesses and entrepreneurs over the next two years. It will give businesses that have been waiting on the sidelines the incentive to make important investments that will help strengthen the recovery, grow our economy, and help put people back to work.
While there’s no silver bullet to fix our economy, this is the kind of smart, targeted tax cut that will continue to grow the economy and promote the President’s pro-growth, pro-jobs, pro-business policies that have helped us turn the corner.
Tax breaks for businesses that want to make big new investments is another step in the right direction.
Gary Locke is Secretary of Commerce