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Tax Cuts = Deficits. There's another little problem rolling around in all of this Obama gift to business proposal. I keep hearing that allowing business to expense capital purchases in 2011 is a tax break/reduction. Well, it's not a reduction; it's a deferral.

If my business spends $1,000,000 on fixed assets, eventually the business gets to deduct the entire $1,000,000 against taxable income. Normally, that happens over several years. If the Obamanation allows me to expense that entire $1,000,000 in 2011, then my business has no depreciation in 2012, 2013, etc. So my tax bill goes up that year, but over the useful life of the asset the total deduction is $1,000,000.

And if the corporate tax rate is 35% in 2011, and it looks like that tax rate will be 45% in 2012 and forward, now I have a more complicated decision to make, just because the tax policy has affected my decision to buy or not to buy.

And that leads to the last point. If I don't expect my business to increase in 2011, do I buy fixed assets now just to defer income tax, betting that the customers will suddenly show up, or do I wait for customers to show up first?

Bottom line; sounds like a tax policy put together by community organizers and political lawyers.