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A hidden stimulus?

This week, the president is set to propose a tax write-off for capital investments, and a provision to expand and make permanent a tax credit for corporations’ research and development expenses. The first is a stimulus in sheep's clothing, while the second is the kind of proposal that could work.

The first proposal would allow businesses "to deduct from their taxes through 2011 the full value of new equipment purchase, from computers to utility generators, to increase demand for goods and create jobs." (New York Times) The initial cost of the program would be around $200 billion in uncollected revenue. Sound familiar? The administration doesn't seem to have learned from its previous stimulus splurge, and now wants to dress it up and sell it as something else. Sure, I'm all for tax breaks -- but this smells fishy.

But the second proposal to come out of the administration this week might just make some sense. The president is looking to make permanent tax credits for firms' research and development. Instead of giving companies an allowance of sorts, the administration wants to reward businesses for innovating. That seems to be the right way to go -- and it sounds a little (gasp!) capitalistic (albeit with some government help).

The bottom line is this: if this administration is bent on giving money to businesses, would you rather them pay for a company's computers, or fund research that could make those computers run faster?

One last thing…
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