Although it is easier to make promises on the campaign trail than to actually pass legislation once elected, recent history indicates that new presidents have been surprisingly successful in getting at least a significant part of their tax proposals enacted early in their first year in office.
Indeed, Presidents Ronald Reagan, Bill Clinton and George W. Bush all pushed significant tax legislation through Congress in their first year in office that contained much of what they had promised.
In fact, it's probably easier to get tax proposals through Congress during a new president's so-called honeymoon period, when memory of the election and the desires of the voters are fresh in legislators' minds.
Given this history, it would not be surprising to see President Barack Obama act quickly on his tax agenda as well.
The following will focus on some key elements of Obama's corporate and business tax proposals, how they might fare in the 111th Congress and what organizations and their advisers should keep in mind. Typically, the new president sets forth proposals in his State of the Union address and the legislative language follows soon thereafter. Given the current economic crisis, this traditional legislative timeline could be accelerated.
Business Tax Breaks
Obama's proposals for business tax breaks have tended to be less specific than his individual tax proposals. The tax breaks have mostly focused on small business or firms that are adding domestic jobs.
He has proposed eliminating all capital gains on investments in small businesses and start-up firms. This would be an expansion of the existing 50 percent capital-gains exclusion for small-business investments. Obama has also proposed extending the current Internal Revenue Code Sec. 179 small business expensing limit of $250,000, at least through 2009. Small business would also be in line for a new health-care credit, though the specifics have not been laid out.
Of benefit to large and small businesses would be lower corporate tax rates. Lowering these rates would be possible in exchange for closing corporate tax loopholes. Since one of Obama's focuses has been on protecting and growing U.S. jobs, tax rates might also be structured such that the lower rates are available only for companies that start or expand operations, and, therefore, add domestic jobs. No specific rate has been suggested.
He has also proposed a $3,000 refundable credit for 2009 and 2010 for new, full-time employees and...