Republicans Outflanked by Obama's Tax Plan?

President Obama's tax plan, including allowing businesses to write-off the cost of new plant and equipment acquired before the end of 2011, is a politically bold stroke that may put Republicans on the defensive heading into the crucial November elections.

The Republicans have reacted quickly, but their own proposal lacks detail and may leave some voters feeling that they are engaging in politics and not sufficiently trying to solve what ails the country.

"House Republican Leader John Boehner on Wednesday proposed a two-year freeze on all tax rates and a cut in government spending to the levels of 2008, before a deep recession took hold of the economy.

In a broadcast interview, the Ohio Republican said he was offering a "bipartisan" alternative to the package of business tax incentives and infrastructure spending that President Barack Obama was slated to announce later Wednesday in Cleveland."

Let's hear some specifics from Rep. Boehner on what exactly he proposes to cut in the federal budget (from my standpoint, we can slash pretty much everything, but it's easy for me to say since I'm not running for office). Empty rhetoric won't sway voters.

Boehner's other proposal to, in effect, extend the Bush tax cuts for another two years is sound and deserves the full support of politicians from both parties.

For now, what the country needs is not to be forced to pick and choose between President Obama's and the Republican's recent economic proposals. We need to enact both proposals in order to ensure we emerge from the economic doldrums.

Republicans however should be concerned that failing to support Obama's tax plan will be viewed as obstructionist and worse, possibly an attempt to sandbag the economy, and sour voters on their own ability to lead the country out of the economic wilderness.

Obama's New Stimulus Proposal

In his latest attempt to jump-start the floundering US economy, President Obama actually suggests something that makes sense.

His proposal would allow businesses to immediately write-off 100% of capital equipment purchased by the end of 2011.

"President Barack Obama will call on Congress to pass new tax breaks that would allow businesses to write off 100 percent of their new capital investments through 2011, the latest in a series of proposals the White House is rolling out in hopes of showing action on the economy ahead of the November elections.

An administration official said the tax breaks would save businesses $200 billion over two years, allowing companies to have more cash on hand. The president will outline the proposal during a speech on the economy in Cleveland Wednesday.

Amid an uptick in unemployment to 9.6 percent, and polls showing that the November election could be dismal for Democrats, Obama has promised to propose new steps to stimulate the economy. In addition to the business investment tax breaks, he will also call for a $50 billion infrastructure investment and a permanent expansion of research and development tax credits for companies."

Allowing companies to immediately expense their costs is a start towards improving the current economic climate, and is worth pursuing. In addition, making the R&D credit permanent is also a good idea and will be embraced by American businesses.

None of these changes will directly affect the current unemployment picture, however.

Major changes are needed at this point to reduce sky-high unemployment, to include relaxing federal regulations concerning who businesses can hire and how much they have to be paid and ending unemployment benefits after a short period of time to discourage people from staying on the dole well beyond when they normally and historically would have.

Of course, further uses of tax policy as a tactic, such as slashing (or even eliminating) the corporate income tax and reducing payroll taxes (offset by current or future entitlement decreases) would be a major, major boon to the economy.